S.K. Bhatnagar, Member (T)
1. In this case the Government of India in the Ministry of Finance, Department of Revenua issued a notice under Section 1.11 of the Customs Act, 1962, for review of order in appeal No. 310A of 1982 dated 2.7.1982 of the Central Board of Excise and Customs, passed in appeal against order No. 47 dated 9.3.1982 of the Collector of Customs, Calcutta. This notice dated 6/7th October, 1982 reads as follows:
F. No. 374/15/82-Cus. II
Government of India, Ministry of Finance,
(Department of Revenue)
New Delhi the 6th/7th October, 1982.
M/s. G.M.C. Brothers & Co.
2, Meredith Street, Calcutta.
Sub : Review under Section 131 of the Customs Act, 1962 of order-in-appeal No. 310A of 1982 dated 2.7.1982 of the Central Board of Excise & Customs on appeal against order No. 47 dated 9.3.1982 passed by the Collector of Customs, Calcutta.
M/s. G.M.C. Brothers of Calcutta imported per vessel “Roland Pacific”, Rot No. 733/81 Line No. 25, seven cases of thinwalled bearings valued at Rs. 1,47,254/- c.i.f. and filed a bill of Entry through their clearing agents M/s. Chatterjee & Co. and sought clearance against subsidiary licence No. P/2900385/O/XX/79/C/810 dated 26.6.1981 issued to M/s. India Products Ltd., Calcutta having a letter of authority in their favour. The description of the goods permitted by the said licence is ‘Spares of items falling under Heading No. 87.02 of Schedule I of Import (Control) order, 1955 as per para 186(8) of the Policy Book AM 1982″. The goods imported are Bimetal bearings and bimetal bushes (declared to be thinwalled bearings and bushes for engines interchangeable with motor vehicles). These are classifiable under Heading No. 84.62 of Schedule I of the Import Control Order, 1955 as reproduced in Appendix 2 of the Handbook of Import Export Procedures 1981-82. Since the licence produced is with reference to para 186(8) of the policy which does not contain Heading No. 84.62, as such clearance of the imported goods were not allowed against the licence produced and the importation was held unauthorised by the Collector of Customs and fine in lieu of confiscation of Rs. 70,000/- was imposed by him vide order No. 47 dated 5.3.1982.
2. Aggrieved by this decision, the importer filed an appeal before the Central Board of Excise & Customs. The Hoard, in their order-in-appeal No. 310A dated 2.7.1982 inter alia, held that though the Imports Control Order contained in Schedule J, a list of goods allowed to be imported and these are classified in particular manner under different chapters and headings, that classification is identical with the one adopted in the Customs Tariff. However, for purpose of licence granted under paragraph 186(8) of the Import Policy AM 1982, the Scheme of such classification is not relevant. What para 186(8) of the Policy provides is a description of goods, which are spares of articles covered by specified headings. I he para reads as ‘Additional licence will also be valid for import of spares of the items falling under the following heading numbers of Schedule I to the Imports Control Order, 1955. The definition of ‘spares’ as given in the policy book is also wide enough to cover a part of sub-assembly or assembly for substitution if the original one is found to be faulty or is worn out. The definition is in addition to the definition given for components. Considering these two definitions, and the expression used in para 186(8) of the Policy for AM 1982 it is not possible to restrict the scope of licences issued under the paragraph 30 as to exclude spares/components which are classifiable under other headings. In that event, para 186(8) would have been differently worded. The Board accordingly held that the objection taken by Collector on this account was not valid and the importation of thinwalled bearings was taken to be covered by the licence produced.
3. Whereas it appears to the Government of India, that the Board’s findings that the scheme of classification for the purpose of licence granted under paragraph 186(8) of the Import Policy AM 1982 is not relevant for the purposes of licences does not appear to be correct, in view of the fact certain parts/components of Motor Vehicles like those mentioned under Heading Nos. 85 08, 85.09 etc. are also specifically included within the list of paragraph 186(8). There was no requirement for mentioning Headings 85.08 or 85.09 which would have been very well covered as spares of Heading 87.02 had the Board’s arguments been valid. On the other hand, it appears that the scheme of classification for the purposes of para 186(8) is very much relevant for licences also as these various items are specifically mentioned in the said paragraph. Since, thinwalled bearings are mainly spares/components of ICP Engines falling under Heading 84.06 which is not included in para 186(8) of AM 1982 Policy the licences produced would not be valid for the subject import.
4. M/s. G.M.C. Brothers are accordingly called upon to show cause to the Central Government within 30 days of the receipt of this notice why the order-in-appeal No. 310A of 1982 dated 2.8.1982 of the Central Board of Excise & Customs should not be set aside and why the order No. 47 dated 5.3.1982 of the Collector of Customs, Calcutta be not restored or orders as deemed fit be not passed.
5. All evidence in support on their contentions should be submitted along with their written reply. They may also indicate in their written reply whether they wish to be heard in person before the case is finally decided.
6. If no reply to this notice is received within the time limit stipulated above or any further be which may be granted by Government and sufficient cause being shown to it or nobody appears for personal hearing when the case is posted for it, Government will decide the case on the basis of material already on record.
Sd/- V.B. Eswaran
Secretary to the Govt. of India.
2. Before any order could be passed in the proceedings initiated by this notice, Customs, Excise & Gold (Control) Appellate Tribunal came into existence and the case was transferred to this Bench for being heard as appeal.
3. The matter was listed on several days and on the request or both the sides initially the arguments were heard on the point of maintainability of these proceedings and order No. 423/19867009 dated 23.10.1986 was pas sed as follows:
In the Customs, Excise & Gold (Control) Appellate Tribunal, ERB,
Collector of Customs, Calcutta v. G.M.C. Brothers & Co.
The learned advocate raised a preliminary objection on the ground that the show-cause notice issued by the Government was not maintainable. He submitted that in the instant case the Tribunal had issued a notice showing the Collector of Customs as the appellant. It was his submission that the Collector of Customs cannot be an appellant against the order passed by the Central Board of Excise & Customs as held by the Tribunal in its order in the case of Collector of Customs and Central Excise, Ahmedabad v. N.P. Umrao reported in 1984 ECR 990 (CEGAT, Bombay).
Secondly, the Government of India has not mentioned in its notice whether it was exercising suo moto power under (old) Section 131(3) of the Customs Act as it stood at the relevant time or not. In fact, the notice does not mention any sub-clause. However, presuming that it was with reference to Sub-clauses (3) and (4) of Section 131 of the Customs Act as it stood at the relevant time, it will be noticed that under Section 131(3) the Government had the power only to annul or modify an order. It had no power to confirm an order or to restore an order. The notice, however, proposes to set aside the Board’s order-in-appeal and restore the order-in-original of the Collector of Customs vide para (4) of the notice. It was, therefore, his submission that the notice was clearly wrong and the Government had no power to restore the order of the Collector.
It was his submission in this connection that a comparison of the language of Section 128 with that of Section 131 of the Customs Act, as it stood at the relevant time, would makje the position clear.
It was his submission that under Section 191 of the Sea Customs Act, the Government had the power to reverse and modify an order but under Section 131 of the Customs Act, 1962 as it stood at the relevant time, the Government had no power to reverse an order or to confirm or restore an order.
It was his submission that the Government could only annul the order of the Central Board of Excise & Customs or modify the same. But the Central Board of Excise & Customs had already set aside the order of the Collector of Customs. So if the order of the Board is set aside, nothing will be left. In this connection he would also refer to the doctrine of merger of the order of the subordinate authority with that of the superior authority. For the merger to be effective the intention of the merger should be clear, as was observed by the Hon’ble Supreme Court in the case reported in AIR 1963 SC 605. It was his contention that in the instant case since such an intention was not clear the order of the Collector would not merge with that of the Board. The provisions of laws under Sections 128, 130 and 131 are distinct and, therefore, while exercising power under Section 131 of the Customs Act. the Government was required to see if it was within the competency or ambit and scope of this particular section. It was, therefore, his contention that the proceedings were not maintainable.
The learned advocate added that by way of illustration he may be permitted to mention that if in a case the Collector had granted relief but the Board had taken it away by its order, the Government could have annulled the order of the Board and the net effect would have been that the affected party would have got the relief. Similarly, in case the Board had annulled the order and imposed a penalty the Government could modify the order of the Board by way of further amendment, but under Section 131 as it stood at the relevant time, the Government could not confirm or restore an order of the Collector and, therefore, the notice issued by the Secretary to the Government is not maintainable.
The learned SDR, Shri Thakur speaking for the department submitted that in this case no appeal has been filed by the Collector of Customs and the Collector of Customs is not the appellant. Only a review notice has been issued by the Government of India in exercise of the power vested in it by virtue of Section 131 of the Customs Act, as it stood at the relevant time. It was his submission that under Section 131(3) of the Customs Act, 1962, the Government of India could issue such a notice suo moto.
The Government of India was empowered by this section to annul or to modify any order. Accordingly, the Government of India has proposed that the order-in-appeal passed by the Central Board of Excise & Customs may be set aside ; and consequentially the order of the Collector of Customs, Calcutta, may be restored.
It was his submission that it is the order-in-original of the Collector of Customs, Calcutta, which was set aside by the Board by the order-in-appeal in question. Therefore, once the order of the Central Board of Excise & Customs is set aside what remains in force is the order-in-original of the Collector of Customs. In other words, the order of the Collector of Customs would then stand restored.
It was, therefore, his submission that the plea of the learned advocate that once an order of the Central Board of Excise & Customs is set aside, nothing would remain is incorrect.
It was his contention that since the Government was competent to annul or modify any order, it would set aside the order-in-appeal passed by the Board leading to automatic restoration of the order-in-original of the Collector of Customs as mentioned in the notice. It was, therefore, his submission that reference to restoration of the order-in-original in the notice does not render the notice incorrect or wrong or unlawful. It was his contention that in view of the above position the notice had been correctly and properly issued within the ambit of Section 131 of the Customs Act.
We observe that this is a case in which the Government of India bad issued a notice for review of the order-in-appeal No. 310A/82 dated 2.7.1982 of Central Board of Excise & Customs under Section 131 of the Customs Act as it stood at the relevant time.
The notice was issued by the Secretary to the Government of India Ministry of Finance. Therefore, it was incorrect on the part of the learned Counsel to say that the Collector of Customs was the appellant. The registry of the Tribunal had merely issued notice to both sides to appear as both the sides are required to send their representatives for hearing before the Tribunal. The learned departmental representative was here before us to present the case of the Government of India. In view of the above position the learned advocate’s objection on this ground is not acceptable.
That apart, we also observe from the notice itself that the Government of India had issued the notice suo moto. If it had been issued at the instance of the respondent or any other person then that fact would have found mentioned in the notice in the normal course. But there is no such mention.
We also observe that merely because the sub-sections have not been specifically referred to, the notice is not vitiated and does not become invalid. The Government’s case has been indicated at length in the notice and would be clear to any person who goes through it. The main purpose of a notice is to make the other side aware of the grounds on which the action is proposed to be taken and we find that this requirement has been duly taken care of.
We also observe that the learned advocate has drawn our attention to the words and phrases used in Sections 128, 130 and 131 of the Customs Act, 1962 and Section 191 of Sea Customs Act and pointed out the differences in the language used and it is undoubtedly true that the words ‘confirm’ or ‘restore’ an order have not been used in Section 131. Nevertheless it is also true that Section 131 provides for revision (of an order of a lower authority) by the Central Government. Section 131(3) clearly indicates that the Central Government may on its own motion annul or modify any order passed under Section 128 or Section 130. We consider that this power implies that the Government could set aside an order-in-appeal leading to consequential restoration of the order-in-original.
We are unable to agree with the learned advocate’s plea that once the order-in-appeal passed by the Central Board of Excise & Customs was set aside nothing would remain as it could not be the intention of the legislature to create or allow sort of vaccum leaving the goods (subject to Customs and allied laws) uncovered by order of any authority whatsoever.
In fact, the scheme of the Customs Act read as a whole clearly indicates that imported goods (or goods meant for export) are required to be presented to a proper officer and the competent authority is required to pass an order regarding them in accordance with law.
Therefore, to our mind, the restoration of the order-in-original follows as a corollary and was a necessary consequence of an order-in-revision setting aside an order-in appeal.
We, therefore, agree with the views of the learned SDR and hold that the notice issued by the Govt. of India was a proper notice and does not suffer from any legal infirmity. Therefore, we hold that the present proceedings before the Tribunal which are continuation of the proceedings initiated by the Government by issuing the aforesaid notice under Section 131 were proper proceedings and maintainable before us in terms of Section (new) 131B of the Customs Act, 1962. We order accordingly.
Sd/- (B. Prasad) Sd/- (S.K. Bhatnagar) Dated 23.10.1986 Member (J) Member (T) 3A. The case was accordingly heard on merits. 4. Shri M.C. Thakur, learned departmental repiesentative, submitted as follows:
that the scheme of classification under the Customs Tariff Act is very much relevant in the matter of interpretation of an entry under I.T. C. Policy and para 186(8) thereof, during the material period (1981-82 policy). Para 20 of hand-book of procedures for 1981-82 makes abundantly clear that with effect from 1st. April, 1976, i.T.C. Schedule has been revised inalignment with the first Schedule to Customs Tariff Act of 1975 (51 of 1975) and there is now a complete co-relation between I.T.C. Classification and l.C.T. classification. Both are now based on B.T.N. classification. In schedule I of Handbook for the year 1981-82 there is a note to this effect (page 79) stating that each Heading No. in column (1) corresponds to the respective chapter and heading number of the first Schedule to the Customs Tariff 75 (21 of 75) and each entry in column (2) has the same scope and meaning as the corresponding chapter and heading of the said first schedule. This realignment had taken place after Dunlop India case in which Supreme Court had made following observation in para 37, “We do not see any reason why the same policy could not have been followed in the I.C.T. book being complementary to each other. When an article has by all standards, a reasonable claim to be classified under an enumerated item in the tarilf schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause”.
1983 E.C.T. 1566 Supreme Court. It would, therefore, be seen that the scheme of classification is not only relevant but also binding. (As far as classification of Bimetal bearing in the B/E is concerned, there is no dispute [C.T.A. 84.63(2)]. (2) The goods namely bimetal bearings and bimetal bushes classifiable under Customs Tariff Heading No. 84.63(2) are parts of J.C. Engine falling under Customs Tariff Heading No. 84.06. The subsidiary licence produced for clearance of the said goods is specific for import of spares falling under item 87.02 under para 186(8) of the relevant policy. The Heading No. 87.02 is for Motor Vehicles for transport of persons, goods or materials (including sports motor vehicles, other than those of Heading No. 87.09/12). The main licence i.e. additional licence No. 2898887 was issued under para 177 of policy book for the year 1980-81 (Annexure-15). The subsidiary licence authorising import of spares of item No. 87.02 was issued during the revalidated period. It would be seen from Annexure 15 and Annexure 10 that the item Nos. 87.01, 87.02 and 87.03 were included only during the year 1981-82 in the import policy. The chapter 18 of import policy 1981-82 deals with Export Houses. Para 183 deals with the facilities available to Export Houses. One of the facilities provided to Export Houses is to make use of additional licence for import of goods depending on their requirements and as per the conditions stipulated in para 186 which deals with additional licence. The para 186 has 9 sub-paras and each para deals with an aspect of additional licence starting from the stage of computation of value of additional licences, procedure, items of import and sale of such licences for the goods imported as spares. It would be seen that sub-para 5 of para 186 permits imports of items appearing in Appendix 5 and 7 excluding the items appearing in Appendix 26 with certain restriction of value for each such item. Sub-para 7 of para 186 authorises import of raw-materials, components, consumables and spares. But it excludes items covered by Appendix 5 if such items have been imported as spares. Sub-para 8 of para 186 specifies Heading No. of schedule 1 to import control order, 1955 and permits import of spares with restriction of value plus excluding the items appearing in the appendix 3 and 6 which shall not. be allowed. While going through these sub-paras it would be significant to note that in sub-paras 7 and 8 the word used is, “The additional licence will also be valied”. This would mean that these paras are in continuation to sub-para 5 of para 186. Therefore, in respect of import of the goods specified under sub-para 8, the paras (i.e. 5, 7, 8) have to be read together and para 186 as a whole. Thus all the paras together constitute an integrated code. Moreover, the scope of chapter Heading Nos. 87.02 and 84.63 will be governed by the provisions of the Customs Tariff Act. The goods Bimetal Bearings & Bimetal Bushes imported as spares under sub-para 8 of para 186 appear in appendix 5 at serial No. 453 and appendix 26 at serial No. 11. Under appendix 26 of import of items to export houses against additional licence is banned. The appendix 5 contains list of restricted items. By virtue of para 186(7) the import of bimetal bearings and bimetal bushes as spares being an item appearing in appendix 5 is not permitted for import against additional licence/subsidiary licence. The subsidiary licence is also issued subject to the conditions as laid down in para 198 of Import Policy for the year 1981-82. Para 198 of the policy reads “Every import licence issued under this policy shall be deemed to have been issued subject to the conditions (applicable thereto) as laid down in the Import (Control) Order, 1953, as amended. These conditions apply to licence in addition to any other conditions imposed on the licence itself”. The Section 3 of Import (Control) Order of 55 imposes restriction and one of them is that if the goods imported under the licence do not conform in every respect to the description or value of the goods as contained in the licence then the import of such goods shall be deemed to be prohibited. Under Section 5(4) of the Control Order of 55 it is stated that, “A licence granted under this order may contain such other conditions, not inconsistent with the Act or this Order, as the Licensing Authority may deem fit”. Section 5(5) requires that the licencee shall comply with all conditions imposed or deemed to have been imposed under this clause. It is in this connection that the reading of para 324 of the procedure note book is important. The said para empowers the Customs Authority to determine whether or not the goods imported are in conformity with the description given in the licence. The deemed prohibition contained in Section 3 of Control Order of 1955 will therefore come into force if the finding that the said goods do not conform to the description given in the licence is reasonable.
(3) The appellant has also admitted before the Collector of Customs and Central Board of Excise and Customs that the subject goods, Bimetal Bearings and Bimetal Bushes imported are parts/components of I.C. Engines which are interchangeable. The import policy 1981-82 (Annexure 9 chapter 2 defines part, component, spare etc. From the definitions it would appear that whether an item (Bimetal Bearings and Bimetal Bushes) are part/component of main machine (motor vehicle) will depend on the fact ; No. (1) if the said goods are integral part of the vehicle (2) if the said goods add to the effectiveness function thereof in the running of motor vehicle, (3) if in the absence of subject goods the vehicle cannot function at all. Broadly, these would be the questions before bearings and bushes are considered as spare part of the motor vehicle. Unless the subject goods are parts of motor vehicle, these cannot be spare parts. A spare part in the common parlance would mean a part of the vehicle kept for emergency replacement. It would therefore be seen from the definition that the subject goods do not answer to these requirements and as admitted by the respondents before the adjudicating authority and appellate authority, these are the parts/component of the I.C. Engine which in turn is a part/component of a motor vehicle. (However, the complete engine is banned for import under appendix 30 of the policy). Another admitted fact that I.C. Engine for which
the subject goods were imported are interchangeable will exclude the import of Bimetal Bearings & Bimetal Bushes as spares in view of para 324 import procedure note book. Therefore, the definition of spare parts/component given in the policy cannot be over extended to facilitate unauthorised import of component of a component of the motor vehicle against item 87.02 under para 186(8). Very clearly that is not the intention under the para of the policy.
5. Shri D.L. Basu Roy, speaking for the respondents, submitted as follows:
1. The facts of the case in short are that M/s. C.M.C. Brothers & Co. imported a consignment of bimetal bearings and bimelal bushings, valued at Rs. 1,47,253/72 c.i.f. against subsidiary Licence No. P/W/2900385/C/XX/78/C/81 dated 29th June, 1981 issued to M/s. Indian Products Ltd., 16 Pollock Street, Calcutta against a letter of authority issued in their favour by the licence holder. The description given in the licence reads as “SPARES OF II EMS FALLING UNDER HEADING NO. 87.02 OF SCHEDULF-I OF IMPORT (CONTROL) ORDER, 1955 AS PER PARA 186(8) OF POLICY BOOK 1981-82 Heading No. 87.02 of Schedule J of import (Control) Order of 1955 covers “motor vehicles for the transport of person, goods or materials (including sports motor vehicles other than those of Heading No. 87.09) (Anncxure-8). The goods in question were imported as spares of motor vehicle since they are spares of motor vehicle engine. The learned Collector of Customs, Custom House, Calcutta, however, considered the importation as unauthorised and the said licence not valid to cover the goods imported. He accordingly confiscated the goods under Section 111(d) of Customs Act, 1962 but was kind enough to give an option to clear the goods on payment of a redemption fine of Rs. 70,000/-. The importers paid the duty and the fine against B/E No. 1-725/7-2105 dated 16.11.1982 and cleared the consignment.
2. The appeal preferred to the Central Board of Excise & Customs against the order of the Collector of Customs, Custom House, Calcutta was admitted by the Board vide order No. 310A dated 2.7.1982 passed by Shri J. Dutta the then Member, and present Chairman of Central Board of Excise and Customs. Thereafter, the Government of India issued a review notice under Section 131 (old) of C.A. 1962 to M/s. G.M C. Brothers & Co. calling upon them to show cause to the Central Government why the Order-in-appeal No. 310A of 1982 dated 2.8.1982 of the Central Board of Excise and Customs should not be set aside and why the Order No. 47 dated 5.3.1982 of (he Collector of Customs, Custom House, Calcutta be not restored or Order/orders deemed fit be not passed.
3. The setting aside of the order of the Central Board of Excise & Custom and restoration of the order of the Collector of Customs, Custom House, Calcutta, would amount to upholding the order of trie Collector of Customs, Calcutta and acceptance of the ground/grounds on which the Licence in question was considered as not valid to cover the goods imported. The grounds on which the licence was considered as not valid need scrutiny to determine if they arc valid and tenable.
4. Before the examination of grounds the first objection of the learned Departmental representative relating to the submission of Memorandum of Cross objection by the Respondent may be permitted to be taken up. The departmental representative argued that this being a transferred case, the respondent had no right to submit the Memorandum of Cross objection and cited the decision of CEGAT Special Bench B in the case of M/s. Associated Capsules Pvt. Ltd. v. The Collector of Customs, Bombay
ELT 890 of 1983)-1983 ECR 439D-(Cegat). The ratio of the decision of CEGAT, cited by the departments representatives, cannot be applied to the present case as the two cases are not identical. CEGAT decision related to a Revision Petition case filed by the aggrieved party whereas the present one is a case of review by the Central Government. Further, in terms of provisions of Rules 12(3) of CEGAT Rules, it appears that the respondents are legally empowered to file a Memorandum of Cross Objection. If, however, it is considered that the respondents are debarred from submitting the Memorandum of Cross Objection the Memorandum submitted may be treated to have been withdrawn.
5. It is submitted that on the following points there is no dispute:
(a) The description of the goods in the I.T.C. Licence No. 2900386 submitted for clearance of the subject goods reads as “Spares of Item falling under I.T.C. Heading No. 87.02 as per para 186(8) of Policy book for 1981-82.”
(b) Relevant portion of para 186(8) of Import Policy Book 1981-82 reads as “LICENCE WILL BE VALID FOR SPARES OF ITEMS FALLING I.T.C. HEADING NOS. (INCLUDING 87.02) OTHER THAN THOSE COVERED BY APPENDIX 3, 6, 15 and 30”.
(c) Heading No. 87.02 in the I.T.C. Schedule referred to above reads on MOTOR VEHICLE FOR TRANSPORT PERSONS, GOODS MATERIALS ETC.
(d) Bimetal bearing (also known as plain shaft bearing in C.T.A. 1975 and Thinwalled Bearing in Central Excise Tariff, I.C.P. Engines and Motor Vehicles fall under Heading Nos. 84, 63, 84.06 and 87.02 respectively. The imported goods are part of motor vehicles engine and the engine is a part of motor vehicle.
(e) Spares have not been defined in C.T.A. 1975 but in para 5(H) of Import Policy Book AM 1982 spares have been defined as a part ready to replace an identical part if it becomes faulty and worn out.
(f) An item could be a part, a component, spare or accessory depending upon the nature of its use/requirement and
(g) Provisions of para 324 of Hand Book of Import Export procedure, wherein it has been clarified that “it is within the jurisdiction of the Customs authorities to determine whether or not the goods imported are in conformity with the description given in the licence.
This jurisdiction, however, will apply only to those cases in respect of which either there is no clarification in the licensing policy, or no clarification has been subsequently given by the licensing authorities by issuing a public notice.
(h) Clarification given in note to schedule I for the purpose of I.T.C. classification reading as:
Each heading number in column (1) corresponds to the respective chapter and hading number of the first schedule to the Customs Tariff Act, 1975 (51 of 1975) and each entry in column (2) has the same scope and meaning as the corresponding chapter and heading of the first schedule, and further clarification given in sub-paras 2 and 3 of para 20 of the hand book of import-Export Procedures AM 1982 stating that with effect from 1st of April, 1976, the schedule I of Import (Control) Order of 1955 reproduced in Appendix 2 of the said book has been revised in alignment with the First Schedule of the Customs Tariff Act, 1975 and that there is now a complete co-relation between I.T.C. Classification and I.C.T. Classification -both these based on B.T.N. Classification.
It is, however submitted that the heading numbers of I T C Schedule are not 100% identical to the heading numbers of the Schedule C.T.A. 1975 but they can be co-relaeed, for example, in the I.T.C. Schedule, sub-heading Nos. 33 to 40 of Heading No. 73 have been shown separately, whereas in Import schedule to C.T.A. 1975 they have been clubbed together and shown as 73 33/40. Again sub-heading Nos. 18 to 27 of Heading No. 85 have been separately in the I.T.C. Schedule, whereas in Customs Tariff Schedule they have been clubbed together and shown as Heading No. 85 18/27 In chapter 92 of the I.T.C. Schedule, sub-heading Nos. 1 to 13 have been shown separately whereas in the Customs Tariff, they have been clubbed together and shown as Heading No. 92.01/13. Further, in the I.T.C. schedule, there are 99 chip-ters, whereas in Customs tariff schedule, there are as many as 100 chapters.
6. The main ground on which the licence was considered as not valid to cover the goods imported are that neither the Heading No. 84.63 under which the goods (bimetal bearing) fall to be classified in the l.T.C. Schedule nor the heading No. 84.06 of which the goods in question are spares is mentioned in the list of heading numbers under para 186(8) of the Policy Book AM 1982. The licence against which the goods have been imported is specific for spares of items falling under heading No. 87.02. Although there are as many as 31 heading Nos. under para 186(8), the licence description in question does not permit the importation of spares of any other 30 heading nos covered by the said para heading Nos. 84.63 and 84.06 been included in the list of heading numbers in para 186(8) the Collector of Customs could not have allowed the import of the subject goods as spares of items covered by those heading No. against the licence produced because the licence was very specific for apares of items covered by heading No. 87.02 only.
7. Para 186(8) covers spares of items falling under the heading no mentioned in that para. Heading No. 84.63 could not have been included in the list of heading under the said pare since bimetal bear-rings cannot have any spares as has been explained with the relating sample. They are in two parts and they are used on Crank Shafts and Connectings rods of Engine. Since they have no part, they being parts themselves, both the halyes are to be replaced when such replacement is required due to their wear and tear. Even if only one half needs replacement, both the halves are to be replaced as the new half part will not match with the other half part for the purpose of efficient work of the engine. The question of inclusion of Heading No. 84.63 under para 186(8) therefore, does not arise.
Heading No. 84 06 is not included in the list of heading No. under para 186(8) specifically because it is already covered by the words spares of heading No. 87 02. For the purpose of clarification of this statement, kind reference is invited to the sub-para under the headings No. of para 186(8) reading as:
The Import of those spares shall be subject to the condition that (i) the C.I.F. value of the spares imported shall in all not exceed Rs. two lakhs per l’xport House, within the value of the Additional Licence and (ii) items appearing in the appendices 3, 6, 15 and 30 (15 and 30 incorporated by I.T.C. Public Notice No. 87/81) shall not be allowed. In appendix 30 complete engine has been shown against serial No. 5.
under the heading lists of Spares to be treated as non-permissible which otherwise mean that complete engine can be spares of machines or equipments with which they are used. Since a motor vehicle cannot run without engine the words spares of item “falling under Heading No. 87.02 would cover a complete motor vehicle engine also. Had the engine not been covered by Heading No. 87.02, there was no necessity of specifically excluding Appendix 30 from the coverage of the sub-para of para 186(8). For further clarification in the matter, kind reference is also invited to serial No. 58(4; of Appendix 10 of AM ’82 Policy which reads as “Spares except those included in the appendices 3, 5 and 13 of (a) earth moving machinery blast hole drills only of the types falling under heading Nos. 84, 22, 84, 23 and 87.02 excluding however their prime movers and parts thereof and (b) internal combustion engine above 75 H.P. covered by heading No. 84.06 Faith moving machinery like bull dozer, excavalors, showvels etc. move on their own power and the prime mover is the engine. In para 58 of appendix 10 these engine and their parts have been considered as spares for complete earth moving machinery. In view of such clear clarification in the licensing policy itself it is not correct to hold that the engines cannot be spares of items falling under heading No. 87.02 and parts of the engine would not be spares of the motor vehicle. Reference is again invited to appendix 3, serial No. 576 of AM ’82 Import policy where spark plugs appear against the sub-serial No. 12 under the heading automobile components. Spark plugs are engine parts if it is a component it would become a spare when required for replacement. The grounds of the learned Collector of Customs, Custom House, Calculla for holding the licence as not valid to cover the goods imported, in view of the above clarifications are neither valid nor tenable. The import policy is formulated by the licensing authorities and the clarification given in the import policy book are to be accepted by the Customs Department in considering the licence coverage of goods imported.
8. The types of bimetal bearings and bushes (also known as thin-walled bearings and plain shaft bearings) imported are known in the trade as motor vehicle parts. Central Excise duty on motor vehicle parts is levied under item No. 34A. The description of the said item No. reads as “the parts and accessories of motor vehicles and tractors, including the trailors the following, namely in the list of items, thin-walled bearing is shown against serial No. (xii). Since C.V. duty is chargeable on the goods imported under provisions of Section 3 of C.T.A. ’75 we had declared the goods in the relative B/E. No. 1-725 dated 16.11.1982 as bimetal bearings and bimetal bushes plain shaft bearings thinwalled bearings interchangeable with motor vehicles and the Custom House accepted the goods as motor vehicle parts for the purpose of levy of C.V. duty. Since C.V. duty is levied under Section 3 of the Customs Tariff Act, 1975, the goods in question for Customs Tariff purpose also are motor vehicle parts. The learned departmental representatives at the time of making their submissions had pointed out from para (F) of page 1501 of Explanatory Notes to CCCN that these bearings were excluded from the heading No. 87.06 for the purpose of assessment, they being internal parts of engine. But they possibly failed to observe that heading No. 87.06 covers parts and accessories of motor vehicles falling within heading Nos. 87.01, 87.02, 87.03. It is true that for the purpose of assessment, the goods in question are excluded from heading No. 87.06 nevertheless they are parts of motor vehicles, otherwise there was no necessity of mentioning their exclusion in para (F) of Heading No. 87.06 for purpose of their classification under heading No. 84.63. It is not only in India but also in countries the world over bimetal bearings (thinwalled bearing, plain shaft bearing) designed for with the engine of motor vehicle are accepted as motor vehicle parts, because in almost all the countries of the world, the Customs, Cooperation council nomenclature and explanatory notes thereto have been adopted for the purpose of international trade.
9. There is no dispute in respect of the clarification given in note to the Schedule I of the Import (Control) order, 1955, stating that each entry in the schedule has the same scope and meaning as the corresponding chapter and heading of the said first schedule. This clarification does not mean that for the purpose of import licence granted under para graph I of Import Policy for 1981-82, the scheme of such classification is relevant. For the purpose of Import (Control) Order, the expres sion spares has to be constructed differently from parts described in the Custom Tariff. The classification of an item under a particular heading either of the I.T.C. Schedule of C.T.A.’75 schedule has nothing to do with the licensing policy. The licensing policy is formulated taking into consideration various aspects such as (a) the essentiality of an item (b) its availability indigenously and (c) availability of foreign exchange. The Central Board of Excise and Customs therefore, had correctly held the licence valid to cover the goods imported against it.
10. The Government of India issued the Review Show Cause Notice, considering the finding of the Board that the scheme of classification for the purpose of licence granted under para 186(8) of the Import Policy ’82 is not relevant for the purpose of licences as not correct in view of the fact that certain parts/components of motor vehicles like those mentioned under heading Nos. 85.08, 85.09 etc. are also speci fically included within the list of paragraph 186(8).
The Government of India further contended that there was no requirement for mentioning heading Nos. 85.08 or 85.09 which would have been very well covered as spares of 87.02 had the Board argument been valid.
11. The argument forth by the Government of India are not at all valid and tenable Heading No. 85.08 of I.T.C. Schedule covers certain electrical starting and ignition equipment for internal combustion engines generators and cut out for use in conjunction with such engine ‘Internal Combustion Engines’ are of various types such as locomotive engines, aircraft engines, industrial engines, marine engines and automobile engines. In view of the inclusion of the heading No. 85.08 in the list of item under para 186(8) spares of goods mentioned against heading No. 85.08 for any type of internal combustion engine be covered by this heading No. In the absence of this specific inclusion of 85.08 in para 186(8) spares of the electrical items mentioned against the heading No. could not have been imported for internal combustion engine other than that of motor vehicle engines. The purpose of inclusion of this heading No. is therefore to allow import of spares of the electrical items covered by this heading for all types of internal combustion engines.
Heading No. 85.09 covers electrical and signaling equipments and electrical wind screen wipers, defrosters and demisters for cycles or motor vehicles. In the absence of this specific entTy spares of these items required for motor cycle could not have been imported. It would thus be seen that the intention of the licensing authorities for including heading Nos. 85.09 and 85 08 was to allow clearance of the spares of these items not only for the engine of motor vehicle but also for engine of all oilier types and of motor cycles against licence issued under para 186(8) of AM ’82 Import Policy.
12. The learned departmental representative had submitted that sub-paras 5, 7 and 8 of para 186 should be read together and not in isolation and that the clauses “the additional licences will also be valid meant that sub-paras 7 and 8 are in continuation to sub-para 5 of para 186 and that all the paras together constitute an integral code. The idea behind the submission is to argue that since bimetal bearings were not allowed under sub-para 5 being appendix 26 items they could not be imported against sub-para 8.
This is a new point which was not considered as a ground in the order-in-original No. 47 dated 5.3.1982 passed by the Collector of Customs, Custom House, Calcutta. The Government of India has not also included this point in the review show cause notice. Since however, this point has been raised by the departmental representative, it needs rebuttal. The additional licences issued to the Export house are incentive licences for encouraging greater export. These licences were issued to the Export House who at the material time exported select products worth more than rupees three crores. There is no actual user condition in the additional licences. Goods imported against these licences are meant for sale, either to the actual users, or others for the purpose of making profit and there by covering the losses suffered in export due to international competition. The sub-para of para 186 are all disjunctive in nature and such para is worded in such a way that it cannot have any relation with the provision of the other sub-paras. Each sub-para has been specially worded with specific purpose, from sub-para 9, it may he seen that the spares imported against additional licences can be sold to any body whereas all other goods imported against the licence under the provisions of different sub-para are to be sold to the actual users. The Export Mouse concerned is also required to submit to the Chief Controller of Imports and Exports, New Delhi a full list of items imported and sold on half yearly basis. In sub-para 5, it has been provided that the additional licence will be valid for import of 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 rupees 5 lakhs in value. Subject to the fulfilment of this condition, the full value of the licence can be utilised for import of appendices 5 and 7 items.
According to the provision of sub-para 7 raw materials, components, consumable and spares (excluding items covered by appendix 5) which have been placed on GG1 to the actual users (industrial) are permitted to be imported without any value restriction for any category of items upto the full face value of the licence. Appendix 26 item have not been excluded by the provision of the sub-paragraph. As such appendix 26 items are also importable under sub-para 7. This if so because serial No. 4 of appendix 10 under which spares are importable by actual users (Industrial) does not exclude appendix 26 items. Sub-para 8 provides import of spares (not items) of items falling under the heading Nos. 84.12, 84.16 31 Heading but the CIF value of spares imported under this para shall in all not exceed rupees two lakh per Export House within the value of additional licence and items appearing in appendices 3, 6, 15, and 30 are not allowable to be imported. But there is no restriction to import of spares of items of those 31 headings Nos. even, if they fall under appendix 26. Import of Appendix 26 items as spares of the item falling under 31 headings are therefore allowed import in terms of provision of sub-para 8 of para 186. The main difference between the provisions of sub-para 5 and sub-para 8 are that sub-para 5 allowes import of complete items whereas sub-para 8 allows import of spares of items. The heading of appendix 26 reads as list of restricted items import of which will not be allowed to export house against additional licence. This restriction applies to imports against sub-para 5 of para 186 and to no other sub-paras.
Had it been the intention of the licensing authorities to have a collective meaning of sub-paras 5 and 7 and 8 and para 186 as a whole the wording of these sub-paras then would have been different and in fact, there would have been no necessity of having so many sub-paras. In one sub-para they could have clearly stated that be allowed and what would be excluded. It thus follows that the sub-paras 5, 7 and 8 are all to be read in isolation and the benefits of import mentioned in each sub-para would be separately available to additional licences issued under para 186.
13. It may be mentioned that in Bombay Customs House, bimetal bearings have been all along been allowed clearance against additional licences, issued under para 186 of the Import Policies. As evidence we enclose herewith bills of entry Nos. and the relative licences against No. 2902259 dated 19.12.1981 against which the goods were allowed clearance. In Calcutta Customs House bimetal bearings allowed clearance against licence bond have subsequently been confirmed as validity covered by licences, issued under para 186 of the Import policies and licences bond cancelled. As evidence, we enclose herewith copies of bill of entry No. 999799 dated and the relative licence No. 290386 dated 8.7.1981 and the cancelled licences bond.
14. In view of the position as stated above it may kindly be seen that the Government of India has no valid grounds/ground to set aside the order No. 310A of 2.7.1982 passed by the Central Board of Excise and Customs and restore the order No. 47 dated 5.3.1982 passed by the Collector of Customs, Custom House, Calcutta.
6. In reply the learned Senior Departmental Representative submitted as follows:
The argument of learned consultant for the respondent is broadly based on four points viz. (1) C.T.A. 75 and I.T.C. Schedule are not identical but can be co-related (ii) that para 186 (8) covers spares of items mentioned therein and by implication spares of I.C. engine are covered as spares of M.V. (iii) that construction of spare in the policy is different from the parts described in C.T.A. (iv) the paras under 186 have to be read in isolation.
All along an attempt has been made to emphasise that the scheme of classification as laid down in C.T.A. is not relevant as far as import policy is concerned.
While appreciating the arguments of the respondents an important aspect has to be borne in mined that both C.T.A. and I.T.C. schedule are based on B.T.N. and as far as interpretation of an entry in I.T.C. schedule is concerned it has the same scope and meaning as in the C.T.A. 75.
The B.T.N. in brief provides convenient list of headings and a comprehensive scheme of classification. The B.T.N. intends basically to meet the requirements namely, (i) simplicity, so that it is readily understood, (ii) precision, to ensure the most appropriate heading and (3) objectivity-in application. The whole scheme is systematised in progressive manner in each chapter to meet the object with the help and guidelines laid down in (i) interpretative rules (ii) section and chapter notes and (iii) Headings. All these form integral part of B.T.N. and in fact fulfil the completeness of B.T.N. The function of notes is to define the precise scope and limit of each heading.
However, U.T.N. has not been followed in toto in the enacted C.I.A. Apart from the differences in No. of chapters and new chapters there has been departure in creating sub-headings and merging some of them in relevant chapters wherever found convenient to suit the requirements and the level of industry in the country. The legislature in their wisdom perhaps thought it wiser to have such an arrangement for more convenient and detailed classification keeping industry and taxation in view. These sub-headings and merged heading in no way affect the main scope of the heading. That is to say that the created sub-headings and merged sub-headings cannot travel beyond the scope of the main heading. Their meaning is very much confined within the limits of the main heading.
The subject goods, i.e. Bimetalic bearings/bushes are classifiable under 84.63 (2) of the chapter 84. The heading 84.63 covers many items. Section note 2 (Section XVI) provides guidelines for classification of the parts of machine within the rules specified therein. Now the goods that has admittedly been imported by the respondents are the parts of I.C. engine. The I.C. engine itself falls under 84.06 It would be interesting to observe that the classification of the goods in chapter 84 is by reference to their function and to the held of industry of such machines. Whereas this arrangement is conspicuous by its absence in other chapters including chapter 87. The analogy drawn on the basis of serial No. 58 (4) of appendix 10 of A.M.’ 82 is rather ill conceived on the basis that serial No. 58 although deals with spares of 84.22, 84.23 and 87.02 excluding those in appendices 3, 5 and 30. There is nothing in serial No. 58 (4) to conclude that parts of engine are the parts of machinery. On the contrary by specific exclusion of primemovers and parts thereof and by a separate mention of I.C. engine above 75 H.P. it is made abundantly clear that the spares of I.C. engine are different from the spares of machinery.
Section XVII, note (2) and note (3) make it crystal clear that parts of engine falling within heading No. 84.63 remains excluded from Chapter 87.
Heading 87.02 covers M.V. The parts of M.V. fall under Heading 87.04/06. Section XVII, heading 87.06 covers parts and accessories of the M.V. provided (i) they are identifiable as being suitable for use solely or principally with the above mentioned vehicles, (ii) They must not be excluded by the provisions of the Notes to Section XVII. The chapter note (F) specifically excludes internal parts of engine from 87.06. Section Note (2) and (e) of Section XVII exclude the parts of engine falling under 84.63 from chapter 87.06. In the scheme of classification under Section XVI and note therein in the Heading 84.63, the exclusion clause does not apply to internal parts of engine.
That is to say that internal parts of I.C. engine remain under 84.63 for all purposes. It means that other items (parts) falling under 84.63 by virtue of exclusion and inclusion clause could be considered as part of M.V. in the scheme of classification but not bimetalic bearings and bushes which are internal part of I.C. engine. Thus it would be seen that scientifically and systematically the scheme of classification reveals all along that the internal parts of engine even if a specific design is given to them remain under heading 84.63 and therefore, remain parts of engine only. There can not be any other interpretation and classification applicable to the internal parts of I.C. engine.
The interpretation of an entry in I.T.C. schedule cannot afford to be different than the one in C.T.A. 75. The para 20 of the Handbook and note to schedule I clarify the rules of interpretation and make it binding that it will have same scope and meaning as the corresponding chapter and heading of C.T.A. The chapter 87 to I.T.C. Schedule at a glance will show that the said chapter contains heading 87.04, 87.05 and 87.06 (as shown in B.T.N.) All these have been merged together in heading 87.04/06 of chapter 87 of C.T.A. 75. It has already been clarified that created sub-headings or merged sub-headings in no way affect the scope of the main heading. Therefore, there cannot be one rule for C.T.A. 75 and another for I.T.C. schedule in the matter of interpretation of an entry when the latter shows more adapted resemblance to B.T.N, then the former one in this context i.e. chapter 87. Therefore, C.T.A. 75 and I.T.C. schedule do not limit themselves to mere co-relation but go to the root of the scheme of classification drawing the source and strength from B.T.N, and hence cannot afford to have multiplicity in interpretation of an entry in either of them. The interpretation of an entry in I.T.C. schedule and C.T.A. must have common affect unless otherwise specifically indicated or enacted to have a different meaning.
The import policy defines ‘parts’ and ‘spare parts’ as well. ‘Spare’is defined to ready to replace an identical similar part or sub-assembly or assembly, if it becomes faulty or worn out and includes accessory (or attachment) in the same regard. The ‘part’ is defined to mean an element of a sub-assembly or assembly not normally useful by itself and Not amenable to further disassembly for maintenance purposes. That is to say that a part as per the definition in the policy cannot have further part which is logical. The argument therefore put forth by the respondent side that bimetaltic bearings/bushed cannot have parts has no relevance in view of the clear definition provided therein in the policy.
The word ‘spare’ and ‘part’ has not been defined in express terms by providing a standard definition in C.T.A. 75, primarily because there is no need to bind the scope of each chapter in express terms as a matter of standard definition for policy and implementation purposes. As already stated that the chapters in B.T.N. are progressive in the sense that each chapter deals with the stage of raw-material to semifinished, unfinished and finished goods in the same chapter and ample guidance is provided in the section notes, chapter notes to define the scope and classification of parts, accessories depending on the scheme of classification. At the same time it is not that C.T.A. 75 does not converse itself with the interpretation and implementation of ‘component’ ‘spare parts’ ‘accessories’ and ‘parts’ Notfn. 239/79 as amended further brings home the point that while implementing any notfn. the description and definition of the goods under the First Schedule to C.T.A. 75 cannot be different from schedule of I.T.C. Otherwise it will result to an absurd result which must be avoided especially in taxation matters. Chapter 20, para 210A of policy for 1981-82 clarifies that rule of interpretation will apply to the policy also. Therefore, it would be seen that the scheme of classification is absolutely relevant in interpretation of an entry in schedule to I.T.C. If that is not so then inclusion of 85.08 and 85.09 in para 186(8) become redundant.
The scheme of classification is further enjoined with the reading of sub-paras of para 186 together for the simple reason that once having the value of additional licence computed under para 186(1), the choice is left with the exporter to enjoy the facilities provided therein under different sub-paras. Further, if each sub-para were to be read in isolation then these sub-paras should be self-contained and must have computation of value of licence clause also. Instead it deals with the limitations for each category.
As far as practice is concerned, it certainly has bearing in adjudication proceedings and for imposition of penalty. But the fact remains that during the period as stated by the respondents the Board’s order was in existence, it is still in existence and it is not the case of the respondents that error or mistake cannot be rectified by the deptt. That is not the proposition of law also. These errors on the part of appraising deptt. can always be rectified but this could be a factor if penalty is called for in a given situation. In the present case there is no penalty imposed on the respondents. The importation has been held unauthorized and fine imposed thereof which is correct in law. The order of the Collector of Customs therefore is required to be upheld.
8. We observe that the notice of the Government of India under Section 131 of the Customs Act, 1962 contains the tentative view taken by the reversionary authority (Secretary to the Government of India) mainly in para 3 of the said notice. This view has been expressed with reference to the context provieded by the statement of facts (contained in preceding paras of the notice) the order-in-original passed by the Board.
9. In this para (3) of the notice it is mentioned inter alia in brief that the Board’s finding to the effect that the scheme of classification for the purpose of licence granted under paragraph 186(8) of Import Policy A.M. 1982 in not relevant for the purpose of licence does not appear to be correct.
10. It evidently is this difference of opinion between the Board and the Government which has basically given rise to the present proceeding and constitutes the core of the proceeding before us; and the various issues/points mentioned or discussed by both the sides are ultimately related to and spring from their respective views regarding the observations of the Board and the Government.
11. We therefore propose to deal with this fundamental aspect first in the light of the submissions of both the sides and the position in law.
12. We find in this connection that the Customs Act relies for the purpose of assessment of goods on a schedule of classification of goods which is a part of the Customs Tariff Act, 1975(51 of 1975). In this connection it is necessary to have a look at the relevant section of the Customs Act, namely, Section 12. Section 12(I) reads as follows:
Dutiable goods except as otherwise provided in this Act or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs & Tariff Act, 1975 (51 of 1975) ; or any other law for the time being in force, on goods imported into or exported from India.
13. The Customs Tariff Act, 1975 states that it is an Act to consolidate and amend the law relating to customs duties and that rates at which the duties of customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules. The first schedule to the Customs Tariff Act incorporates the import tariff. This schedule includes rules for interpretation of the schedules which mention, inter alia, that “The title of sections and chapters are provided for ease of reference only ; for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter notes, and provided such Headings or Notes do not otherwise require, according to the provisions hereinafter contained” i.e. mentioned in the said rules for the interpretation of the schedule.
14. We have referred to the above provisions to show that the customs tariff Act has a definite purpose and scope of application. It is primarily meant for ascertaining the duty, if any, livable. Therefore, if this tariff or the classification of goods contained therein is sought to be utilized for any other purpose we have to be very cautios and careful ; and if the purpose is to very high order. In the proceedings before us, the case is basically that of application of Imports and exports (Contol) Act, Imports (Control) order and the Schedule (I) of the said order. Section 3 of the Improts & Exports (Control) Act gives the Central Government Prowers to prohibit or restrict imports and exports by an order published in the official Gazette and the Import (Control) order (1955) issued under this section provides under Clause 3 restriction of imports of certain goods and its Clause (1) is as follows:
Save as otherwise provided in this order, no person shall import any goods of the description specified in Schedule I, except under and in accordance, with a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II.
(2) If in any case, it is found that the goods imported under licence do not conform to the description given in the licence or were shipped prior to the date of issue of the licence under which they are claimed to have been imported then, without prejudice to any action that may be taken against the licensee under the Customs Act, 1962 (52 of 1962), in respect of the said importation the licence may be treated as having been utilized for importing the said goods.
15. Schedule I of this order starts with a note:
Each heading number in column (1) corresponds to the respective chapter and Heading number of the first schedule to the Customs Tariff Act, 1975 (21 of 1975) and each entry in column (2) has the same scope and meaning as the corresponding chapter and heading of the said first schedule”.
(It is this note which has been referred to and emphasized by the learned SDR in the Department’s submissions and is of crucial importance).
In this context it is important to remember that whereas the main object of the Customs Act read with the Customs Tariff Act is to levy customs duties, the main purpose of the Imports and Exports (Control) Act is to prohibit, restrict or control imports and exports. The Government of India issues in this connection an Import Policy every year. This policy is announced in the Gazette of India. The Government of India also issues a Hand Rook of Imports-Exports Procedures as a supplement to the Import Policy. This Hand Book contains relevant procedures and other details.
16. For the purpose of Import Policy certain words and phrases are defined in chapter 2 of the Import Policy for April, 1981, March, 1982 under the heading Definitions (It is these definitions given here which have been referred to by the learned Counsel for the respondent and are important).
17. Import licences are issued in accordance with the Import policy for the relevant period and the relevant licence policy period is generally indicated on the body of the licence.
18. This shows that a licence is not only issued in terms of the licensing policy for the relevant year but is required to be interpreted and applied in terms ofthe said policy read with other relevant provisions of Import and Export (Control) Act and the Import (Control) order. It is in this context that the relevant paras regarding classification of items and the Head note of the Schedule (referred to by the learned SDR) are required to viewed.
19. In fact the above summation of the position in law itself shows that although an effort has been made to co-relate the classification of items given in the Schedule I of the Imports (Control) order and the classification as contained in the Customs Tariff Schedule each of them has been prescribed with a different object in mind. In other words harmonisation or corelation need not be, and is indeed not, total or complete in all respects. This is evident from the fact that the schedule I of the I.T.C. is not an exact copy of the Schedule to the Customs Tariff Act and there are several differences between them.
20. Again, both the above Schedules are different in several respects from the Brussels Tariff Notification and are not a mere copy thereof.
21. In fact the differences between the Customs Tariff Schedule and the Imports Trade Control Schedule become apparent the minute one glances at them. Prima facie, the major differences are as follows:
SI. Aspect Customs Schedule I Remarks No. Tariff to Import (First Schedule) Control order --------------------------------------------------------------------- 1. Rules for the inter- Included Not included pretation of the Schedule 2. Section Notes 3. Chapter Notes Some sub-headings of Customs Tariff appear as indepe- ndent headings in the Trade Control Schedule. 4. Chapters 100 99 5. Headings/ Many sub-headings ; No sub-headings. Sub-headings ...some clubbed ---------------------------------------------------------------------
This shows that the observations to the contrary in paragraph 20 of the Hand Book of the Import Export Procedure (year 1981-82) is factually incorrect and is required to be modified. It is difficult to visualize, how, in such a situation the scope and meaning of the entries in the Import Trade Control Schedule could be exactly the same as that of the entries in the Customs Schedule.
22. As a matter of fact the Rules of interpretation and Section notes and Chapter notes play a vital role in determining the scope and meaning of the entries covered by Headings and sub-headings.
23. The Rules of interpretations are, however, in the nature of principles or guidelines and tell us how to read the Customs Tariff. Therefore, even though they may not be explicitly included or incorporated in the Trade Control Schedule, it is possible to argue that one can seek guidance from them (and draw analogy wherever necessary) without doing violance to the Legislature’s intent ; but Section notes and chapter notes are different matters. They are of substantive character and have, so to say, a sort of physical effect, and there is no scope of any presumption about them. These notes, inter alia, provide for inclusion(s) or exclusion(s) of items, definitions of terms, meanings of expressions, deeming provisions, exceptions to the rules and cross references to Sections, Chapters and Headings. They are a vital part of the Customs Tariff and without them the scope and meaning of any entry in the Customs Tariff cannot be appreciated. Indeed determining the scope and meaning of any entry(s) or item(s) under various headings without reference to them is simply inconceivable. It just cannot be done. I herefore, a possible view could be that the head note could be taken to mean that the Rules of interpretation and Section notes and Chapter notes could be utilized for the purpose of determining the scope and meaning of Headings and entries under the Trade Control Schedule. The other equally forceful view could be that as the Head note specifically mentions Chapter and Heading number only, and evidently omits to refer to Rules of interpretation and Section notes, the latter cannot be relied upon.
24. Since it is well known that the Rules of interpretations and Section notes and Chapter notes are integral part of Customs Tariff, their non-mention amounts to deliberate exclusion. Moreover, in Customs Tariff titles of sections and chapters are provided for ease of reference only. So correspondence between titles of Section and Chapter in this context has no legal consequence or connotation.
25. However, a question arises whether use of the words ‘scope and meaning’ in the head note is sufficient to cover up this lacunae, in our opinion, one cannot stretch these words too far. We have to keep in mind the well established principles of interpretation of laws that one cannot read those words into law which are just not there. We can neither add or subtract any word(s) nor can we make good any deficiency in law. We can only point it out. In the circumstance we can only consider that the two schedules correspond to each other only in broad sense and para No. 20 of Hand Book which seeks to explain and clarify the administrative authorities view in the matter does not indicate the factual position correctly.
26. The fact that only limited harmonisation was intended by the Import Policy is also apparent from the fact that certain words, phrases and expressions have been given a different meaning for Import Trade Control purposes, as apparent from the definitions given in chapter 2 of the Import policy. If the scope and meaning of the entries in the Trade Control Schedule were really intended to be the same as in the Customs Tariff, what was the need for providing separate definitions for ITC purposes ? and why for that matter a separate Schedule was provided at all. it would have been sufficient to include a clause in the Import Trade (Control) order to the effect that the Customs Tariff Import Schedule shall be deemed to be Schedule 1 for the purpose of ITC also. But the same has not been done and Section notes and Chapter notes have not been included in the Trade Control Schedule and separate (different) definitions of certain terms and phrases have been provided in the Import Policy : and we cannot but take note of this legal position.
27. We have to bear in mind yet another principle of interpretation of law that any provision made under a particular Act or order is in the first instance governed by the definitions provided in that Act or order, and the aid or assistance of any other Act or rules can be requisitioned only if the relevant Act itself does not include the required definitionts). In other words, if any term or terms have been defined in the relevant Act then those terms have to be understood as per the given definition(s) in that act to the exclusion of all other Acts, Rules or Schedules. In the instant proceedings the case is basically under the Import and Export (Control) Act and the Import Trade (Control) order. Therefore, it is the contents of the Import Trade Policy and the definitions provided therein which will have to be given precedence and which alone can indeed be utilised for the purpose of interpreting and applying the Import (Control) order and the schedule thereunder. In other words, the aid of the Customs Tariff can be taken only in a limited fashion subject to the provisions of the Import Trade (Control) Act, order, policy and instructions.
28. In practical terms it means that first and foremost we have to refer to the relevant import policy, Handbook of Import and Export procedure and various paragraphs mentioned therein and the relevant appendices and of course the schedule and read them as a whole in order to understand the correct position, taking assistance from the Customs Tariff only if and when necessary to get a clear picture. In other words, the correct position appears to be that in so far as the terms and/or phrases have been defined in the Import Trade Control policy or order, it is these definitions which will have to be taken into account first and foremost while interpreting and applying the import policy and the licences issued thereunder, but in areas where no such definition(s) have been provided, the term, words or phrases have to be understood in the same way, and the same scope and meaning are required to be assigned to them as are valid for and applicable to the Customs Tariff. In the instant case, since the words ‘parts’ and ‘spares’ have been defined in the relevant import policy itself, therefore, we do not have the need to refer to the Customs Tariff for this limited purpose and will have to take the definitions as given in the Import Trade Control policy into account while interpreting and applying the licences issued under the Import Trade (Control) order. The above discussion shows that whereas Customs Tariff is undoubtedly relevant for I.T.C. purposes, it can be so utilized to a limited extent only.
29. Coming to the licence in question in this case it is observed that the licence indisputably refers to paragraph 186(8) and allows import of spares of items falling under Heading No. 87.02 of the Schedule I of Import Control order, 1955 as per para 186(8) of Policy Book for 1981-82. The item 87.02 of this Schedule reads as under:
Motor vehicles for the transport of persons, goods or materials (including sports motor vehicles other than those of Heading 87.09.
In other words, in plain language, spares for motor vehicles (and parts thereof) were allowed to be imported.
30. The ‘spares’ have been defined in the Import Trade Policy as follows:
The spares means 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, and includes an accessory (or attachment) in the same regard.
And ‘part’ means an element of a sub-assembly or assembly, nor normally useful by itself and not amenable to further disassembly for maintenance purposes. (It could be a component, spare or accessory depending upon the nature of its use/requirement).
And ‘Component’ means one of the parts or 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)”.
31. Before we proceed to examine the licence in question itself in the context of the above position we may pause here to consider the nature and type of licences generally issued by the licensing authority. It is well known in this context that the licensing authorities issue various types of licences which can be broadly categorised from practical point of view into three categories:
(1) ‘General’ Licence(s)that is where the language used in the licence including that of the description of the goods and reference to policy provisions and terms and conditions are such that an importer has a lot of leeway or flexibility and can import various types of articles and materials under the licence.
(2) ‘Specific’ licence(s) in which there is no such flexibility and the licence is valid only for certain specified type of goods or articles or even a particular item(s).
(3) Licence(s) which is/are specific in certain respects and allows flexibility in other respects. This will become clear as we proceed further because the licence in question falls in this category. It is apparently specific in so far as the policy aspect is concerned inasmuch as it not only mentions a particular para of the import policy but restricts itself further to a specific sub-para. Thus it is valid only for the items covered by sub-para 8 of para 186. Yet it retains some amount of flexibility inasmuch as some of the items mentioned in the para 186(8) are themselves, so to say, ‘generic’. This would be clear if we study the Customs Tariff Schedule and the Import Trade Control Schedule.
32. Similarly it is well known and universally accepted position that entries in these I.C.T. & I.T.C. schedules are of various types,including some entries which are relatively speaking ‘generic’ in character and others which are ‘specific’ as for example, one of the entries with which we are concerned in this case, namely, 87.02 is ‘generic’ in the sense that it covers various types of motor vehicles whereas another entry such as 84.62 is relatively ‘specific’ as it covers bearings of certain type only.
33. Again indisputably, there are some entries which cover parts/items of general use or interchangeable part/item and others which are specific for parts of certain types of materials or cover particular items.
34. It is in the context of above analysis that we have to examine the case before us. We observe in this connection that para 186(8) of the policy has been specifically mentioned in the licence. On the other hand the licensing authorities also issue licences which do not mention sub-paras or refer to all the sub-paras as for example licence No. 0338622 and licence No. 2902239 dated 19.12.1981, photo copies of which have been produced before us. Such licences are, so to say, ‘generic’ in character and allow a lot of flexibility; whereas the licence in question before us has mentioned sub-para 8 and therefore is ‘specific’ for the items covered by this sub-para only. Hence inspite of the use of the word also in para 186(8) we are required to restrict ourselves to the contents of sub-para (8) only and in invoking or applying the conditions of other sub-paras will not be proper.
35. The relevant sub-para (8) of para 186 reads as follows:
Additional licences will also be valid for import of spares of the items falling under the following Heading Nos. of Schedule 1 to the Imports (Control) Order, 1955 :
84.12 84.51 85.18 84.15 84.52 85.19 84.22 84.53 85.20 84.24 84.54 85.23 84.25 85.06 85.24 84.32 85.07 87.01 84.33 85.08 87.02 84.35 85.09 87.03 84.41 85.12 Chapter 90 84.47 85.15 Chapter 91 Chapter 92 The import of these spares shall be subject to the condition that (i) the c.i.f. value of the spares imported shall in all not exceed Rs. two lakhs per Export House, within the value of the Additional Licence, and (ii) items appearing in the Appendices 3, and 6 shall not be allowed. The description of goods as per the licence in question is as follows : "Spares of items falling under Heading No. 87.02 of Schedule I of Import Control Order, 1955 as per para 186(8) of Policy Book for 1981-82". Heading No. 87.02 of I.T.C. Schedule reads as follows: 87.02 Motor vehicles for the transport of persons goods or materials (including sports motor vehicles, other than those of Heading No. 87.09).
The learned Counsel for the respondent has pleaded that since the licence in question mentions the word ‘spares’ of items falling under 87.02 therefore spares of motor vehicles are. apparently covered by this licence. We consider that this argument has a lot of force. The learned Collector of Customs has passed his order mainly on the point that the articles actually imported are thinwalled bearings and thinwalled bearings are undoubtedly and indisputably covered by Heading No. 84.63 and are also undoubtedly and indisputably parts of internal combustion engine classifiable under 84.06. So far so good. But his argument that since neither 84.63 nor 84.06 have been mentioned in para 186(8) the licence is not valid, does not take into account the fact that the licence as issued by the licensing authorities has provided flexibility by mentioning 87.02 and we cannot ignore the fact that the spares of items falling under I.T C. 87.02 have been clearly mentioned. The department’s case as presented in the Government of India’s notice and during the course of hearing before this Tribunal is almost entirely based on their reading of the entries in the Customs Tariff Schedule (read with B.T.N.); and the learned SDR during his submission has referred to B.T.N., Section Notes, Chapter Notes and also Head Notes and has enclosed in his written brief extracts from notes under Section XVII (Section Notes) and Heading Notes 84.06, 84.63, 87.02 and 87.06 (from B.T.N. & Customs Tariff). But we have already noticed at the beginning of the discussion itself that B.T.N, is different in many respects from both I.C.T and I.T.C. Schedule and the Section notes Chapter notes and Heading notes have not been incorporated in the Import Trade Control Schedule and, therefore, their aid can be taken only if the position under ITC Schedule was not clear (and that too by way of analogy only).
36. In the instant case undisputably and undoubtedly the bearings are parts of intewal combustion engines which, in turn, are parts of motor vehicles and we find that the definition of spares given in the import policy is broad enough to cover not only the parts themselves but parts on one hand and assemblies as well as sub-assemblies on the other (as rightly pointed out by the learned Counsel for the respondents). In view of this clear position in the Import Control Law, to which the case relates, it will not be proper to apply the B.T.N. provisions or Customs Rules for interpretation of classification and Section notes and to exclude on that basis the items falling under 84.63 or 84.06 from the ambit of the licence unless, of course, it could be shown that they were covered by appendices 3, 6, 15 or 30. The Collector of Customs has however not referred to any of these appendices in his order. He has only referred to appendices 5 and 26 but these are not relevant inasmuch as they have not been mentioned in paragraph 186(8). (On the other hand para 186(5) in which these have been mentioned have not been included in the description as given in the licence). It is significant in this context that the licence does not refer to para 186 as a whole but restricts itself specifically to sub-para 8 of para 186. The Collector’s observations and reasons, therefore, do not find favour with us, except and in so far as indicated above, and we consider his findings as incorrect.
37. Next when we look at the order of the Board, we find that the Board has made several observations (some of which are correct, some contradictory and some incorrect). This would be apparen from the following:
Observations Remark (i)"For the purpose of Import Control order, the expression "spares" has to be construed diffe- rently from "parts" described in the Customs Tariff" Correct. (ii)Import trade control "classification is identical with the one adopted in the Customs Tariff" Incorrect. (iii)For the purpose of licence granted under para- graph 186(8) of the Import Policy for 1981-82 the scheme of such classification is not relevant Incorrect. (The observations (ii) and (iii) are also contradictory), (iv)The definition of spares as given in the policy book is also wide enough to cover a part or sub-assembly or assembly for substitution. This definition is in ad- dition to the defini tion given for components. Cons- idering these two definitions and the expressions u- sed in paTa 186(8) of the policy for 1981-82, it is not possible to restrict the scope of licence issued under para 30 as to exclude spares/components/which are classifiable under other headings --Correct. (v)Para 186(8) excludes only goods appearing in appendices 3 and 6 Incomplete and therefore incorrect. Para excludes items covered by appendi- ces 3, 6, 15 and 30.
38. In the notice issued by the Government reference has also been made to Headings 85.08 and 85.09 in order to show that only those parts of components of motor vehicles which are covered by these two items are allowed under para 186(8) and if the intention was to allow bearings also then 84.06 would have also been mentioned. We have already covered this aspect in the above analysis and we find a lot of force in the pleadings of the learned Counsel as to the logic for mentioning 85.08 and 85.09 and not mentioning 84.63 or 84,06. The learned Counsel has correctly emphasised that the crux lies in the use of the words ‘spares of the items’ falling under 186(8) and the nature of items covered by 85.08 and 85.09 on the one hand and 84.06 and 87.02 on the other. Even otherwise we are only required to see whether the imported articles are covered by 87.02 Import Trade Control Schedule and whether they are covered by any of the appendices mentioned in 186(8); and we have already seen that in view of the definition of the words spares in the import policy a broader spectrum is required to be ascribed to 87.02 (as done by the Board) and its scope cannot be restricted (as done by the Collector) and furthermore, the department has not been able to show that the bearings in question were covered by any of the appendices mentioned in para 186(8) of the policy.
39. In this view of the matter if we examine the notice issued by the Government of India, we find that the Government of India is right only to the extent of pointing that the Board’s observation to the effect that “for purposes of licence granted in paragraph 186(8) of the Import Policy for 1981-82 the scheme of such classification is not relevant” is incorrect. In view of the Head note to the Import Trade Control Schedule there is no option but to consider that the classification under the Customs Tariff Schedule as well as the classification under the Import Trade Control Schedule (both) are relevant for the purpose of determining the validity of a licence and interpreting and applying the same with reference to the imported goods and the Import Policy. At the same time since the harmonisation between the two schedules is not complete and certain definitions have been specifically included in the Import Policy, therefore for import trade control purposes the definitions given in the Import Policy have to be taken into account to the exclusion of the B.T.N. concepts followed for classification of goods for customs purposes (The learned Collector has incorrectly emphasized on assessment as no assessment is required to be done for Import Trade Control purposes).
40. The Government of India are, however, incorrect in their view that the order in appeal passed by the Board is required to be set aside and the order of the Collector of Customs is required to be restored inasmuch as inspite of the loose language and the contradictory, incorrect and incomplete observations made by the Board it has in the ultimate analysis chanced to come to the right conclusion for it has rightly relied on the concepts and definitions incorporated in the import trade control policy. We, therefore, hold that the Board’s order is only required to be modified to the extent that the incorrect and incomplete observations made by it which were not in order (as pointed out above) and were required to be deleted but for this modification the order of the Board is correct in law. The Board’s order is modified to this extent only.