ORDER
V.P. Gulati, Member (T),
1. This is an appeal filed against the order of Collector of Customs, New Delhi. The brief facts of the case are that the appellants imported goods which were declared by them as Self Adhesive Tapes of Taiwan origin. These, on examination, were found to be answering to the description of PVC Insulat- ing Tapes bearing No. 33946, a product of Four Pillars Enterprises Company made in Taiwan ROC. The goods were sought to be cleared against licences which permitted the import of Self Adhesive Tape as per para 6 of Appendix 17 of the Import Trade Policy, 1985-88. The said para 6, for convenience of reference, is reproduced below :
“Wherever “packing materials” is allowed for import in col. 4 and the items permitted as packing material include paper or card board or plastic materials such as LDPE the licences will also be valid for import of “Self Adhesive Tape” as packing material upto 1% of the value earmarked for import of packing materials or Rs. 500/- whichever is higher, within the overall value of which packing materials can be imported against the relevant REP licence.”
2. The goods, being insulated tapes, were not considered as Self Adhesive Tapes as packing material. The value of the goods was also not found acceptable by the lower authority and value of the goods of another import of tapes bearing No. 33945 was sought to be adopted first but later the lower authority compared the price of the goods to another brand bearing description Wonder supplied by Asia Chemical and the price of these goods and revised the value of the imported goods from .042 $ per roll to .066 per roll. The goods have been confiscated by the lower authorities for the reason of these being not covered by the licences produced as also for the element of under-valuation involved and have been allowed release on payment of fine of Rs. 2,75,000 and a penalty of Rs. 15,000/- also imposed.
3. The learned advocate for the appellants pleaded that it was not in dispute that what had been imported answered to the description of Self Adhesive Tapes and he pleaded that there was no charge of mis-declaration levied against the appellants and the proceedings had been drawn for non-production of valid import licence and for alleged under-valuation of the goods. He pleaded that the lower authority has not given any findings as to the mis-declaration, if any, involved. He drew our attention to the catalogue of the suppliers in respect of the goods imported. He stated that use of the goods as stated by the manufacturers is for wire and cable insulation, bundling and reinforcing. He, however, pleaded that the goods, notwithstanding, their use as insulation tape continue to fall within the description of ‘Self Adhesive Tapes.’ He pleaded that as much as in terms of para 6 to Appendix 17 of the Import & Export Policy 1985-88, Self Adhesive Tapes for packing purposes were allowed the goods imported are covered by the licence produced under which the import of the same, in terms of para 6 as mentioned above, is permissible. He pleaded as it is, the tapes imported are also intended for bundling and reinforcing. His plea is that bundling is nothing but packing and therefore, tape should be taken to be answering to the description of Self Adhesive Tape for packing. He further pleaded that under the said para 6, there was no restriction as to the nature of the packing material required to be imported and that this restriction was only applicable to imports covered by para 7 of Appendix 17. He drew our attention to para 7 and which, for convenience of reference, is reproduced below:
“Where “packing materials” appear in Col. 4 without mentioning the particular items allowed for import, the REP licence will be valid for import of only such packing materials or raw-materials required for the manufacture of only such packing materials as are normally used for packing the relevant export product against which the REP licence, in question, has been issued.”
4. His plea is that restriction of para 7 cannot be imported into para 6. He, further, pleaded that in case of doubt, the benefit should go to the assessee and cited the case of Tamil Nadu Newsprint v. Appraiser [ 1988 (33) E.L.T. 22]. He pleaded that similar goods had been allowed import by the authorities in other cases. In this connection, he drew our attention to the photo copy of Bill of Entry bearing No. 1-1539 dated 2nd May, 1986. He pleaded that in that case, the goods imported were also PVC insulated tapes. He pleaded that, obviously, a test case has been made out in the case of appellants and the appellants have been selected for special treatment.
5. Regarding valuation, he pleaded that the value of the appellants’ goods has been revised based on some enquiries which were not revealed to the appellants. He pleaded that only copy of the SIB Report has been furnished to them. The said report is reproduced below for convenience of reference :
VII (ICD)/6/225/87
“The case of M/s. Micro Industries, Calcutta is still under investigation. As regard valuation aspect, telex were sent to different part and in response, Bombay Custom House has informed that the price noticed is US $ 0.066 per pesbut the copy of Invoice is still awaited from Bombay Custom House. This branch has also made from Singapore from other sources. The prices received in the form of telex from a trader in Singapore and a proforma Invoice of manufacturer M/s. Four Pillars Manufacturing Pte. Ltd., Singapore are placed apposite for n/a at your end.
Sd/-”
6. He pleaded that there was a reference to the proforma invoice which ultimately was not relied upon by the Collector as Collector in his order has based his findings regarding valuation on the wonder brand of PVC insulated tapes of dimension 1.3″ MM x 3.4″ MM x 10 yards supplied by Asia Chemical Corporation, Taiwan and cleared by another importer at Bombay and also on the value of similar goods stated to have been imported at Bombay. He pleaded that no records regarding import from M/s. Asia Chemical Corporation, Taiwan in respect of these goods at Bombay as mentioned in the Collector’s order were shown to them nor any details of goods imported there were given to them. He pleaded that even if some tapes of the same dimension had been imported, these could differ from the appellants’ goods qualitatively. He pleaded that no case has been made out by the adjudicating authority as to how the value declared by the appellants in terms of Section 14(1)(a) was not acceptable. He pleaded that the Collector could not fix the value under the rules unless first application of provision of Section. 14(l)(a) was ruled out. He pleaded that the Collector has fixed the price by the application of Rule 3(c) of Rules of the valuation rules framed under the Act without first ruling out the application of Rules 3(A) and 3(B) and also invoked Rule 8 of the Valuation rules. His plea is that Collector was not sure of the ground for fixing the value. He pointed out that under the law, the burden to prove under-valuation was on the Department. He pleaded that the Collector rejected the evidence in regard to the under-valuation as set out in the show cause notice and the only course available to him was either to cause further investigation to be made or give them an opportunity to rebut any further evidence that might have become available or he should have called upon them to produce any further evidence which he might have thought fit. He pleaded the invoice relied upon by the Collector in respect of the goods imported at Bombay was dated 6-8-85 while the appellants’ goods were imported in 1987. He pleaded that evidence of value cannot be considered as contemporaneous. He cited the following case laws in support of his plea :-
1. Worli Enterprises v. Collector (Customs), Chandigarh -1987 (32) E.L.T. 774
2. Orient Enterprises v. Collector of Central Excise -1986 (23) E.L.T. 507
3. Western Electronics v. Collector of C. Ex., Bombay 1987 (29) E.L.T. 318.
7. He pleaded that the value of similar goods imported at Calcutta by M/s. Metal Calcutta the goods of the same dimension answering to the description PVC insulating tapes was allowed by the authorities accepting the invoice value of $ .044 per roll as against the value of $ .042 per roll of the appellant’s import. This invoice is dt. 7-3-86. He, further, pleaded that the appellants’ goods had been subjected to fine of 249% which was very high taking into account the circumstances of the case. He Pleaded that the penalty levied on the appellants was not justified as the Collr. had not attributed any mala fides to the importers and in fact had absolved them of the same. He pleaded that the goods had been under detention and were suffering a demurrage of Rs. 1000/- per day. He pleaded for relief in the matter based on his pleas and the circumstances of the case.
8. The learned JDR for the Department, Shri A.S. Sunder Rajan stated that it is an admitted position that the import is sought to be made in terms of Appendix 17 of the ITC Policy 1985-88 which is for registered exporters. He drew our attention to the relevent para 1 of ITC policy for registered exporters which, for convenience of reference reproduced below:
188-“The object is to provide to the Registered Exporters, by way of import replenishment, the materials (all or some) required in the manufacture of the products exported.
189-(1) Exports made of products appearing in Appendix 17 will qualify for the grant of import replenishment only if such exports are made in accordance with the export policy in force.”
9. His plea is that the appellants had sought the import against registered exports licences for export of leather goods and in terms of the policy for registered exporters, the appellants could import only such goods as were intended for use for the manufacture of the products exported. He pleaded that there was no evidence to show that the tapes imported could be used for the export of leather goods. He pleaded that as it is, the insulated tapes are different from self-adhesive tapes and cited the judgement in the case of H.R. Syiem v. P.S. Lulla (Bombay Law Reporter 594) wherein it has been held by the Hon’ble Court that electrical tapes are different from self adhesive tapes.
“Secondly, the words used are “Adhesive tapes” and the word “tape” in the normal parlance means “narrow cotton or linen strip used for tying up parcels and in dress-making, etc.” but this is qualified by the word “adhesive” which means having the property of adhering or sticking. “Adhesive tape” therefore is a tape which is used for sticking things, whereas by its very description black insulating tape is a tape meant for insulation and therefore even upon a plain reading of the entry there does appear to be a clear-cut distinction between “adhesive tape” and “insulating tape” (the word “black” is immaterial for this purpose). If I were therefore called upon to construe this entry without any adventitious aid whatever, it seems to me that the plainest meaning which the entry read in the remarks column conveys, is that while column 2 refers to tapes principally or substantially usable as insulation in contra-distinction with tapes principally or substantially usable for purpose of sticking. That would be the only way of construing these two columns in the same entry consistently with each other so as to endow them with some meaning. Otherwise as I have said an absurd result would follow that column 2 allows black insulating tapes to be imported and column 6 says that black insulating tapes cannot be imported because they are adhesive. If I were left to read the entry as it stands I would construe “black insulating tapes” which are included in “electric insulation” as meaning tapes the principal use of which is insulation and “adhesive tapes” in column 6 as tapes the principal use of which is adhesiveness or principally meant for sticking. If so, I do not think that the remarks column can control column 2 to the extent claimed by the Department.
In the present case there is no dispute that black insulating tapes, although they have the quality of adhesiveness, are principally used for the purpose of insulation. The importer has stated in his letter dated May 4,1962 and has reiterated in his pleadings that the goods imported are used for electrical insulating purposes only and that adhesiveness is one of the incidental qualities required for such use. That statement has not been challenged on behalf of the Department. See also para ll(a) of the petition and para 10 of the affidavit of the Assistant Collector dt. Jan. 14,1963. In para 10 of the affidavit dated January 14,1963 it is admitted that black insulating tapes are classifiable under Serial No. 38II of the I.T.C. Schedule. In this view I may incidentally say that I am unable to accept the view expressed by Mr. Justice K.K. Desai in his judgement that the words “Adhesive tapes” should consistently with the second column be read to mean electrical adhesive tapes. In my opinion there is nothing that compels such a view.”
10. Shri Julka, in reply, stated by way of the clarification that bulk of the licence is produced by them, was of the category of 0.1, 0.5 and F-3 which was for readymade garments and fish exports not for leather exports. He stated that in the Import Policy, there is no description separately given for electrical insulated tapes and the relevant entry in the policy is only for self adhesive tapes. He pleaded that in view of this, the judgements cited by the learned JDR as to what constituted self adhesive tapes was not relevant as in that case, there were two separate entries for self-adhesive tapes at the relevant time. He again stated that earlier many importers had been clearing goods in similar circumstances and the appellants was being made a test case.
11. The points that fall for consideration are :-
(1) whether the goods imported are covered by the licences produced ?
(2) whether the value declared by the appellants is acceptable in terms of Section 14(l)(a) or whether there is any justification for upward revision of the value as held by the Collector.
12. We observe that what has been imported are PVC insulating tapes with a property of self adhesion and, therefore it has been pleaded that these are covered by the broad description ‘self adhesive tapes’. From catalogue produced by the appellants, it is seen that the product, namely, the tapes of various types have been designated by a product number with a description of the tapes. The description of each tape, it is seen, is based on the use to which the tapes are to be put and the materials of which these are made. The description are in the nature of PVC insulating tapes, PVC Pipe tape, PP Packing tape, cellulose tapes and the like. The property of adhesion of the tapes is given in terms of K.G. 1″ and this property along with the strength of the tapes given varies from tape to tape. In case of insulating tapes and other tapes, the factor of elongation is also given and in the case of insulating tape, break down voltage is also shown. It is seen that in the case of appellants’ goods while the adhesion property is shown is .455, the same property in the case of production tape and PP packing tape are quite different being .1 for tape with a Code No. 33975 and .9 for the tape with Code No. 33265. A reading of the description of the products manufactured by the appellants and the characteristics of the products as above as set out in the catalogue, it is seen that the different products are designed for different end uses. The insulating tapes have to have high insulation properties while the packing tapes have to have high adhesion characteristics. The appellants have tried to show that the PVC insulating tapes could also to be used as tape for packing purposes as the same are intended for bundling and reinforcing.
13. We observe that the bundling and reinforcing capabilities of the tape are in the context of wires and cables as the reinforcing and bundling by the use of the tape is for its insulating properties with a capacity to hold the wires and cables together. From the catalogue produced, it is clear that the tapes imported are not intended for packing purposes on account of special features of the same as set out in the catalogue. The plea of the appellants is that it does not matter even if these are not used for packing purposes so long as these answer to the description of self adhesive tapes inasmuch as self adhesive tapes are allowed for import as packing material.
14. We observe that to understand the scope of the import allowed in terms of para 6 of Appendix 17 under which the appellants seek to import the goods against the licences produced, it is relevant to refer to the policy for registered customers as the licence produced have been produced under that policy.
15. We observe, as pointed out by the learned JDR, that the object of the Policy as set out in para 188 of the Import & Export Policy April, 85 and March, 88 is to facilitate by way of import replenishment the materials (all or some) required in the manufacture of the products exported. The specifics of the policy are set out in Appendix 17. It is seen that in this Appendix various categories of the products have been mentioned and the material permitted for import are set out in column 4 of the Appendix 17 subject to the various provisions set out in column 5 of the Remarks column and the general conditions set out under this Appendix. One of the general conditions is in para 6 (earlier reproduced). Under this para, it is seen that one per cent of the value earmarked for import of packing materials has been allowed for self adhesive tapes in case the permitted materials set out in column 4 in respect of a particular category of licence are packing material, namely, paper or card board or plastic materials such as LDPE. Thus, it is seen that the import of self adhesive tape is to be permitted only when the other packing materials are the specified categories mentioned in para 6. However, if packing materials are not specified in column 4 by name, the import of only such packing material or rawmaterials required for manufacture of such packing material as are required for the manufacture of the relevant export product for which the REP licence has been issued is allowed. This is set out in para 7 of Appendix 17 of the Import Policy (supra).
16. A reading of para 188, as mentioned earlier, and paras 6 and 7 above, clearly shows that the materials which are to be allowed are to be such as are required as packing materials for the purpose of manufacture of goods exported and for which the REP licence has been issued. The question of import of the permissible variety of self adhesive tapes has to be, therefore, examined in the context of the above. On a harmonious reading of the various provisions of the ITC Policy, cited above, we observe that the import of the self adhesive tape to be allowed under para 6 as would be required for the manufacture of packing materials for the goods exported alone is to be allowed. The appellants have themselves stated that most of the licences produced are for the export garments, fish product export and subject to the general condition of para 6. Obviously, the packing materials in which the product are to be exported are made of paper card board or LDPE. The self adhesive tape that can be allowed import, therefore, has to be such as will be used in relation to these packing materials. It is not the case of the importers that they are going to use the PVC insulating tape for this purpose and even if they had pleaded so, it would not have been acceptable as the insulating tape could not possibly be used for the said purpose taking into account the properties and characteristics of the same. We observe that the facilities given to registered exporters are with the object of promoting the exports of their products and the imports made have to subserve this purpose in terms of the policy in this regard. In case imports were allowed of the goods which have no nexus with the goods exported and which are required for a totally different purpose, the purpose of the import policy will be defeated. The interpretation given has to be such as we will advance the legislative intent which is clear from the reading of the policy.
17. In view of the above, we, therefore, hold that the tapes imported cannot be held to be covered by the licences produced by the appellants.
18. The next question that arises for consideration is whether the value adopted by the appellants is correct in law.
19. We observe while arriving at this conclusion, the Collector has not been fair to the appellants inasmuch as no evidence of contemporaneous import as pleaded by appellant has been adduced and in respect of this there is no rebuttal from the Revenue. The appellants have pleaded that similar imports at Calcutta of comparable goods at .044 per dollar had been allowed and filed a copy of the bill of entry and also invoice of those goods. The Revenue on the other hand, has not placed any evidence before us that the value shown in the invoice does not reflect the correct value in terms of Section 14(1)(a) and that the same is as held by Collector.
20. It has been rightly pointed out by the learned advocate for the appellants that the basis shown for under-valuation in the show cause notice was rejected by the lower authority and subseqently another basis was adopted without giving the appellants an opportunity in regard to that. It is now well settled that in law in case under-valuation is alleged the burden for proving the same rests on the Department.
21. We find from the facts of this case that the Revenue has not brought any evidence or record except for a mention that similar goods having the same dimension imported from the another source had been invoiced at .066 $ CIF. As we have mentioned in the catalogue produced above, there are a wide range of PVC insulating tapes manufactured which have different tensile strength and insulation properties. The dimensions cannot be taken as the only determining factor for establishing the similarity of the two types of insulating tapes. There is nothing on record to show that the goods, the value of which has been adopted for arriving at the assessable value, have the same properties and characteristics.
22. The Collector has drawn his conclusions based on the description and dimensions without analysis of the properties and other characteristics of the tapes. No indepth analysis has been done in this regard by the Collector to arrive at this conclusion.
23. We, therefore, find force in the appellants’ plea that the Collector’s conclusions are not based on proper appreciation of the facts and circumstances of the other imports of goods stated to be similar. Even during the hearing before us, no evidence has been produced to establish that the goods imported by the appellants and those which form the basis of valuation in the Collector’s order have identical properties and characteristics.
24. In view of this, we hold that the Collector’s findings for upward revision of the value are not based on any acceptable evidence and, therefore, the adoption of the basis for revaluation of the goods has to be held to be bad in law and his findings in this regard are, therefore, set aside. The appellants are, therefore, entitled to the assessment based on their invoice value.
25. Taking into account the totality of the circumstances, while upholding the order of confiscation under Section 111 (d) of the Customs Act, 1962, we reduce the levy of the redemption fine to Rs. 1 lakh (Rupees one lakh only).
26. We find, since the charge of under-valuation, has not been sustained and there is no malafides attributed to the appellants, there is no warrant for the levy of the personal penalty. The Collector, in fact, has observed as under in this regard :-
“It is observed that the Department has not detected any evidence, documentary or otherwise, to reveal malafide on the part of the importers or that there has been a remittance of foreign exchange over and above the invoice value. It is possible that the price has been fixed by the supplier across the table, the details of which are not on record. Notwithstanding this fact, the proof of mensrea for the purpose of penalty under Section 112(b) of the C.A. has to be established either by reference to direct evidence or by reference to circumstantial evidence. Such evidence is not available on record.”
27. Therefore, in view of the above, the order of personal penalty is set aside.
28. The appeal, thus, partially allowed in the above terms.