ORDER
V.P. Gulati, Member
1. These slay applications involve a common issue and are therefore taken up together for disposal. The amount of redemption fine, duty demanded and penalty levied in respect of the three applications are as under:
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Sl. Name of applicant Duty demanded Redemption fine Penalty
Rs. Rs. Rs.
____________________________________________________________________________
1. M/s Kobashi 6,92,982 5,00,000 2,00,000
Automotives 6,40,021
2. M/s Kobashi 5,18,586 2,00,000 1,00,000
Machine Tools (P) 2,11,598
Ltd.
3. M/s Kobashi 4,57,401 2,00,000 1,00,000
Machine Tools (P) 2,75,338
Ltd.
differential duty on optional accessories.
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2. After hearing both the sides, taking into consideration the prima facie 506 aspect of the case and the plea of financial hardship, the operative part of the order was announced in the open Court on 10.10 1994 directing each of the three petitioner to pre-deposit the amounts as under:
(1) M/s Kobashi Automotives : Rs. 3,75.000/-
(C/SB/Stay/3414/94)
(2) M/s Kobashi Machine Tools : Rs. 1,75,000/-
(C/SB/Stay/3415/94)
(3) M/s Kobashi Machine Tools : Rs. 1,75,000/-
(C/SB/Stay/3416/94)
3. The learned Consultants for the petitioners pleaded that the applicants imported Mikron Tool Room Precision Co-ordinate Jig Boring Machines and the same were allowed clearance by the authorities against the licences produced on payment of concessional rale of duty under Notification 40/78-CUS. dated 1.3.1978 The importation took place some time in 1989 However, later on the basis of intelligence gathered by the Customs authorities that the importers in fact had imported Universal Milling and Boring Machines in the guise of Tool Room Precision Co-ordinate Jig Boring Machine with a view to get the benefit of Notification 40/78 took follow up action and after investigation seized some documents from the premises of M/s Essc-njay Marketing Pvt. Ltd., Bombay the indenting agent and also recorded statement from the production Manager and based on the evidence gathered it was alleged that the machines imported are Universal Milling and Boring Machine and therefore not covered by the licence and also not eligible for the benefit of Notification 40/78. The learned Consultant pleaded that the applicants explained their position in reply to the show cause notice as under:
(i) that the machines were high precision machine having precision of one micron and therefore qualify for the benefit of the Notification in question (ii) these are intended for Tool Room use (iii) the machines were capable of performing milling and boring functions but that in any way did not detract from the nature of the machines i.e. Jig boring high precision Tool Room machine. The learned Consultants pleaded that the machines are being used by the applicants for manufacturing high prrcislm goods for Defence Establishments and various other Organisations/Industries. Shri CTA Pillai, learned Consultant pleaded that the applicants had given full description of the machine imported, in the Bill of Entry and also to the licensing authorities and they had imported the goods answering to the same description He pleaded that the applicants did not hold back any information from the authorities and had gone with clean hands before the authorities for clearance of the goods He pleaded that there was no suppression of any fact and therefore the longer period of limitation for demand of duty in terms of Section 28(1) of the Customs Act, 1962 could not be invoked and further inasmuch as there was no mis-declaration, the question of confiscation would not arise. He further pleaded that even otherwise if the machine has more that one function i.e. milling and boring, Notification 40/78 is applicable in respect of high precision Tool Room Jig boring machine and notwithstanding the fact that the machine is capable of performing dual functions the benefit of the Notification cited supra would be available to the applicants. Explaining the technicalities, he pleaded that milling and boring functions are performed depending upon the axis along which the machine can function. He pleaded that normally boring machine conventionally speaking will be functioning along the Y axis and milling along the X axis. He pleaded that with the advances in technology in the manufacture of the machines, the boring function along the X axis and along Y axis can be done on the same machine. He pleaded that in this background since the machine is capable of milling/boring functions, the benefit of Notification 40/78 should be allowed to the applicants. His attention was drawn to the statement given by the Production Manager of M/s Essenjay Marketing P. Ltd., Bombay, the indentors and also about the direction given by them to the Supplier regarding description of the goods and also the printed catalogue describing the goods as Tool Room Precision Co-ordinating Jig Boring Machines instead of the standard description given by the suppliers in their catalogue i.e Milling and Jig boring Machine. He pleaded that the applicants had nothing to do with that and therefore no fault can be found with them in regard to what was done by the indenting agent. It was pointed out to the learned Consultant that no reason has been given for not declaring the machines correctly according to the standard catalogue and taking into consideration the functional capability of the machine. The learned Consultant fairly conceded that the applicants were using the machine both for milling and Jig boring. He however pleaded that dual capability of the machines does not in any way take them out of the purview of the description of the licence or the parameters of the Notification 40/78.
4. In regard to the accessories supplied, the learned Consultant pleaded that the accessories were imported for making the machines functional and the accessories supplied are essential requirement and that no separate value should be taken for the accessories and duty in respect of the accessories should be assessed at the rate applicable to the main machines.
5. Adverting to the financial hardship aspect, he pleaded that the applicants have accumulated loss and their financial position is bad.
6 Finally he pleaded that the machines imported were Precision Jig Boring Machine. He also referred to the Technical opinion given by various officers of the DGTD which referred to the parameters for considering the machine as Tool Room Precision Co-ordinate Jig Boring Machine. He pleaded that in view of this opinion, the applicants should have been given the benefit of the Notification 40/78 and the charges should have been dropped.
7. The learned DR appearing for the Department pleaded that to suit the convenience of the importers, the indenting agent had gone to the extent of getting the catalogue printed describing the goods as precision Jig Boring Machine when in fact the machines were only Universal Milling and Boring Machine. He pleaded that this was done with ulterior purpose of clearance of the goods for availing the benefit of Notification No. 40/78 which was only for precision boring machine meant for Tool Room. He pleaded that what has to be seen is as to whether the machines are Universal Milling and Boring Machine notwithstanding its high accuracy or high Precision Jig Boring Machine for Tool Room. He pleaded that admittedly the machines are Universal Milling and Boring Machine and therefore prima facie the benefit of Notification 40/78 will not be available and therefore the machines are liable for confiscation under Section 111(d) and 111(m) of the Customs Act, 1962
8. We have considered the submissions made by both the sides. We observe that prime facie there is no infirmity in the order of the learned lower authority and the same is maintainable in law. The learned lower authority has considered the evidence in detail and the opinion of the various authorities and gone into the evidence and the nature of the machines imported. We observe that the indentors had sent clear instructions to the supplier to change the catalogue and also to describe the goods to suit me purpose of the Notification. Their telegram/correspondence reproduced in the lower authority’s order makes a telling reading and the relevant portions are reproduced below:
they have sent bulk leaflets, literature on milling machines model No. 21D/31D/41C/61C/51D/72CH/2SA/3SA/32CH. You are aware that Customs is going to open each case and if they find this literature, our complete IMTEX will be blown off, who is responsible for the act-sending milling machine catalogue with the machine.
Also our Customer who plan to buy the machines coming for the IMTEX have applied for licence based on the old models in the absence of the new catalogues which you have only recently printed and yet to be received by us.
Once the machine reaches India and after the IMTEX, we will change the name of the machine showing it as new models.
Our Customers who plan to buy the machines coming for the imtex have applied for import licence based on the old models in the absence of the new catalogues which you have only recently printed and yet to be received by us…
9. We observe that the applicants were buying expensive high valued machines and they must have been aware as to the functional capability of the machines vis-a-vis their requirements and therefore would have satisfied themselves of the same before placing orders. Prims facie we therefore hold that the applicants mis-declaring the goods only as high precision Tool Room Jig Boring Machine instead of Universal Milling and Jig Boring Machine was done with the purpose of evading payment of duty and prime facie taking into account the functional capability of the machine, and in the absence of any plea as to the primary purpose for which the machines have been designed, it has to be held that the machines imported are not covered by Notification 40/78 which covers High Precision Jig Boring Tool Room Machine. The Notification has to be interpretted strictly.
10. So far as the duty demanded in respect of accessories is concerned, it is observed that the lower authority has brought out that in the literature and the model these have been described as optional accessories and the lower authority has given reasoned findings in respect of each of the item and prima facie therefore there is no infirmity in the order in regard to the accessories and these accessories have to be assessed on merits. Despite these accessories being made as optional the applicants appear to have got the invoice together with the machines to get the same assessed at the same rate as the machine. In view the above and taking into consideration the pleas made the applicants are directed to pre-deposit the following amounts towards duty on or before 30th December, 1994 and report compliance subject to which pre-deposit of the balance of duty amounts and the penalty amounts would stand dispensed with pending appeals:
M/s Kobashi Automotives : Rs. 3,75,000/-
(C/SB/Stay/3414/94) (Rs. Three lakhs seventy five
thousand)
M/s Kobashi Machine Tools (P) Ltd. : Rs. 1,75,000/-
(C/SB/Stay/3415/94) (Rs. One lakh seventy five
thousand)
M/s Kobashi Machine Tools (P) Ltd. : Rs. 1,75,000/-
(C/SB/Stay/3416/94) (Rs. One lakh seventy five
thousand)
11. The matter will be called on 30th December, 1994 for reporting compliance.