Full Judgment Text
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PETITIONER:
SHARP BUSINESS MACHINES PVT. LTD.. BANGALORE
Vs.
RESPONDENT:
COLLECTOR OF CUSTOMS, BANGALORE
DATE OF JUDGMENT24/08/1990
BENCH:
KASLIWAL, N.M. (J)
BENCH:
KASLIWAL, N.M. (J)
AGRAWAL, S.C. (J)
CITATION:
1990 SCR Supl. (1) 28 1991 SCC (1) 154
JT 1990 (4) 74 1990 SCALE (2)435
ACT:
Customs Act, 1962: Ss. 14(1), 111(d), 111(m), 112 &
130(e)--Import of copiers in SKD/CKD form--Confiscation of
for misdescription and misdeclaration of value--Validity of
Personal penalties-Justification for.
HEADNOTE:
Section 14(1) of the Customs Act, 1962 provides that
where a duty of customs is chargeable on any goods by refer-
ence to their value, the value of such goods shall be deemed
to be the price at which such or like goods are ordinarily
sold or offered for sale. for delivery at the time and place
of importation. in the course of international trade.
The appellant-company, a small scale manufacturer of
plain paper copiers. had submitted. alongwith their applica-
tion for approval of the phased manufacturing programme, the
quotations received by them from their foreign collaborators
based in Hongkong in respect of the various components and
obtained a licenee in this regard for Rs.4,94,500. Subse-
quently, they imported three consignments of components and
consumables in SKD/CKD form from suppliers at Hongkong and
another consignment from Singapore. The total value declared
under the four bills of entry was Rs.99,612.
The Collector of Customs found that the invoices submit-
ted by the company were undervalued and determined the price
of goods at Rs.7,15,485 with reference to the quotations,
for the purposes of s. 14(1) of the Act. He thus held that
there was a misdeclaration of value to the tune of
Rs.6,15,873, that the duty payable thereon would be
Rs.10,96,228.20 and that the entire goods were liable to
confiscation under s. 111(m) of the Act. He also held that
the goods imported were fully finished copiers in SKD/CKI)
form and as such there was a misdeclaration that the import-
ed goods were only parts of the copiers, that description of
most of the items in the invoices had been deliberately
manipulated to suit the description in the licence, that
fully assembled copiers were not permissible to be imported
and this was a clear violation of the Act and the terms of
the licence. In the alternative he held that even if all the
parts contained in SKD/CKD packs were
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viewed individually, none of the items was covered by the
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licence. He further held that the value of the parts import-
ed for the purposes of s. 14(1) of the Act would be
Rs.5,63,332, whereas the importers were permitted to import
goods worth Rs.4,94,500, that there was thus an excess of
Rs.68,832 and as such the goods were liable to confiscation
under s. 111(d) of the Act. Consequently, he directed con-
fiscation of the entire goods with an option to the company
to pay Rs.3 lakhs in lieu thereof and also Rs.2 lakhs in
personal penalties. The Customs, Excise and Gold (Control)
Appellate Tribunal dismissed their appeals.
In these appeals under section 130(e) of the Act, it was
contended for the appellants that the quotations had indi-
cated prices at Hongkong and not the place of importation,
that at the time of submitting the application for grant of
licence the prices were quoted for fixing the upper limit of
the value of the licence, that when the actual purchase
transactions were entered into the company negotiated for
the price and having regard to the quantum of purchase and
the prospects of future sales the company was given 25 per
cent discount by the suppliers, and that in the absence of
any other material on record the invoice price alone could
form the basis of valuation of the imported goods. For the
respondents, it was contended that the prices quoted by the
collaborators were based on the prices given by the manufac-
turers. and there was no question of supplying the compo-
nents on a lesser price than given by the manufacturers
themselves, that the goods imported were not components of
plain paper copiers as declared, that the cartons in fact
comprised of all the parts required for full and complete
assembly of 14 copiers, that the company in importing them
in the guise of separate components and accessories had not
only violated the terms and conditions of the licence but
also committed a complete fraud, that in the circumstances
the adjudicating authority was fully justified in placing
reliance on the prices mentioned in the quotations.
Dismissing the appeals under s. 130(e) of the Act, the
Court,
HELD: 1.1 According to S. 14(1) of the Customs Act, 1962
for purposes of assessment the value of the imported goods
is to be deemed to be the price at which such or like goods
are ordinarily sold, or offered for sale, for delivery at
the time and place of importation, in the course of interna-
tional trade, where the seller and the buyer have no inter-
est in the business of each other and the price is the sole
consideration for the sale or offer for sale. [36G-H]
1.2 In the instant case the appellant-company itself had
produced
30
a copy of the quotations received by them from their collab-
orators at Hongkong in respect of the copiers and other
items imported, alongwith their application for approval of
their phased manufacturing programme. They, therefore. could
not dispute the correctness of the prices mentioned in the
said quotations. Not only that, they have also failed to
produce any other material on record to show that the value
mentioned in the invoices was the correct market value of
the goods imported at the relevant time. The adjudicating
authority in these circumstances was perfectly justified in
taking the prices mentioned in the quotations as a basis for
determining the correct value of the imported goods. [37A-C]
2.1 The goods covered by the three bills of entry dated
3rd February, 1987 had been shipped from Hongkong on the
same day i.e. on 21st January, 1987. The entire goods had
arrived on the same day and by the same flight on 30th
January, 1987. These goods had been supplied by the same
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supplier. They comprised of ten numbers copiers in SKD/CKD
condition, accessories, spares, consumables and excess
items. The goods covered by the 4th bill of entry were four
numbers copiers in SKD/CKD condition and consumables. If
assembled together these would constitute full and complete
copiers. The licenee produced was valid for certain compo-
nents and was not valid for fully assembled copiers. The
appellant-company was thus doing indirectly what they were
not permitted to do directly under the licence. [37H; 38A-B]
Girdbari Lal Bansi Dhar v. Union of India, [1964] 7 SCR 62.
referred to.
Union of India v. Tarachand Gupta & Bros., AIR 1971 SC
1558. distinguished.
2.2 The intention and purpose of the import policy was
to give incentive and encouragement to the new entrepreneurs
establishing small scale industries and in the first phase
to import 62% of the components of the copiers and the
balance of 38% was to be manufactured by them indigenously.
This percentage of 62% was to be reduced in the subsequent
years. The import policy was not meant for such entrepre-
neurs who instead of importing 62% of the components, im-
ported 100% of the components of a fully finished and com-
plete goods manufactured by a foreign country. Fully fin-
ished plain paper copiers were the end product of the im-
porters and hence could not be imported by them. The device
a, looted by the company in the instant case was thus a
complete fraud on the import policy itself. [37D-F]
31
2.3 The order confiscating the goods and imposing fine
was, therefore, rightly made. [43A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2403-05
of 1989
From Orders Nos. 568 to 570/88-A dated 31.10.1988 of the
Customs Excise and Gold (Control) Appellate Tribunal, New
Delhi in Appeal No. C/A. No. 808 to 810 of 1987-A and
C/Misc. No. 390 of 1987-A.
S.K. Dholakia and S.K. Kulkarni for the Appellant.
Kapil Sibal, Additional Solicitor General, P. Parmeswa-
ran and Mrs. R. Rangaswamy for the Respondent.
The Judgment of the Court was delivered by
KASLIWAL, J. All these appeals under Sec. 130(e) of the
Customs Act, 1962 (hereinafter referred to as the Act) are
directed against the common order made by the Customs,
Excise and Gold (Control) Appellate Tribunal, New Delhi
dated 31.10.88 in C.A. Nos. 808 to 8 10/87-A.
Brief facts of the case are that M/s. Sharp Business
Machines (Pvt.) Ltd., Bangalore (hereinafter referred to as
the company) is a small scale manufacturing unit duly regis-
tered as such since 1984. The company had started the phased
manufacture of plain paper copiers and obtained a licence in
this regard dated 25.11.86 for Rs.4,94,500 from the licens-
ing authority. The company imported components and consuma-
bles in SKD/CKD for plain paper copiers. Three consignments
were imported from M/s. Paralax Industrial Corp., Hongkong
under airways bill numbers 098, 4960, 3120; 098, 4960, 3116;
and 098, 4960, 3105 all dated 21.1.87. The goods were re-
ceived at the air cargo complex, Bangalore. The company
sought the clearance of the imported goods under bills of
entry Nos. 2044, 2045 and 2046 all dated 3.2.87. Similarly,
the goods were also imported from M/s. Alpha Papyrus Trading
Co. Pvt. Ltd., Singapore under airway bill No. 098 4925 4914
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dated 19.2.87. the clearance for this consignment was sought
under bill of entry No. 4993 dated 11.3.87. The company had
declared the value of each of the consignments at Rs.32,182
Rs.43.359), Rs.5,412 and Rs.18,659 respectively in respect
of the above mentioned bills of entry Nos. 2044, 2045. 2046
and 4993. The total value declared was Rs.99,612 under all
the four bills.
32
Proceedings were held before the Appraiser of Customs
air cargo complex Bangalore for verification of the goods
and their valuation etc. and the statements of the company’s
Managing Director Sh. Sadanand were also recorded on
11.2.87.10.3.87 and 18.3.87 under Sec. 108 of the Act. The
Collector of Customs issued a notice to the company under
Sec. 124 of the Act on 4.3.87 relating to the first consign-
ment. In the said notice it was stated that 4 items were not
covered by the licence and the same were liable for confis-
cation. However. on 30.3.87 the Collector issued another
notice in supersession of the earlier notice dated 4.3.87.
Notice was also issued on the same date in respect of bill
of entry dated 11.3.87. By the said notices the Collector
proposed to enhance the value of the goods imported and
further proposed to confiscate the entire goods imported and
also to levy a fine and other penalties. The company was
accused of misdescription of the goods, misdeclaration of
value, suppression of the relationship with the suppliers,
suppression of the place of origin of goods etc.
The Collector by his order dated 13.4.87 decided all the
points against the company. The Collector held that the
quotations given by M/s. Shun Hing Technology Ltd. along-
with the application for approval of their PMP during July
1986 should be taken as the correct value of the goods
imported. and the plea of the company that it had received a
special discount in view of the bulk purchases and promise
of future purchases was not accepted. The Collector in these
circumstances determined the price of the goods at
Rs.7,15,485 for the purposes of Sec. 14(1) of the Act. The
Collector thus held that there was a misdeclaration of the
value to the tune of Rs.6,15,873 and the duty payable there-
on would be Rs.10.96,228.20p. The Collector further held
that the entire goods imported were liable to confiscation
under Sec. 111(m) of the Act. The Collector also held that
the goods imported were fully finished copiers in SKD/CKD
form and as such there was a misdeclaration that the import-
ed goods were only parts of the copiers. The Collector also
held that description of most of the items in the invoices
had been deliberately manipulated to suit the description in
the licence. The goods covered by three bills 2044, 2045 and
2046 were held to be one consignment and one AWB and thus
viewed as one consignment, it amounted to the import of ten
copiers. The goods imported under the 4th bill No. 4993 were
four fully finished copiers in SKD/CKD form. The Collector
further held that in terms of note (i) to Imports Control
Order. 1955 and Customs Tarrif Act, 1975, these goods will
be deemed to be filly assembled copiers for the purpose of
valuation and licence. Thus the goods imported as
33
fully assembled copiers were not permissible to be imported
and this was a clear violation of the Act and the terms of
the licence. It was also held in the alternative that even
if all the parts imported were viewed individually, none of
the items tally with the licence. The Collector in this
regard gave detailed reasons for arriving at this conclu-
sion. The Collector also held that the value of the parts
imported for the purposes of Sec. 14(1) of the Act would be
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Rs.5,63,332 whereas the importers were permitted to import
goods worth Rs.4,94,500. There was thus an excess of
Rs.68,832 and as such the goods were liable to confiscation
under Sec. III(d) of the Act. The Collector in these circum-
stances passed an order for confiscation of the entire goods
with an option to the company to redeem them on payment of a
fine of Rs.3 lacs. The Collector also imposed a fine of Rs.1
lac on the company and Rs. 1 lac on Sh. Sadanand the Manag-
ing Director of the Company.
The company filed two appeals aggrieved against the
common order of the Collector relating to both the notices
and a separate third appeal was preferred by the Managing
Director before the Customs, Excise and Gold (Control)
Appellate Tribunal. The Tribunal dismissed all the three
appeals by a common order dated 31.10.88. The company and
the Managing Director aggrieved against the order of the
Tribunal have filed the above mentioned three appeals before
this Court.
One of the arguments raised before the Tribunal was that
the Collector erred in treating SKD/CKD parts of the copiers
imported, as assembled copiers, for the purpose of Schedule
I to the Imports (Control) Order. 1955 and the case Union of
India v. Tarachand Gupta & Bros., AIR 1971 SC 1558 applied
on all force to the instant case. The Tribunal in this
regard set aside the finding recorded by the Collector and
placing reliance on a decision of the Calcutta High Court in
Collector of Customs, Calcutta v. Misuny Electronic Works,
[1987] 30 ELT, 345 held that one has to look into the re-
spective licence and not to the fact that if all the con-
signments covered by all the bills of entry are assembled
together, there will be complete machines. The Tribunal,
however, upheld the other findings recorded by the Collector
to the effect that even if all the imported parts contained
in SKD/CKD packs of copiers were viewed individually the
licence produced was not valid for any of the items import-
ed. The. Tribunal thus held that the Collector was right in
holding that the imported goods were not covered by the
valid licence. The Tribunal also held that the Collector was
right in rejecting the price shown by the company in the
invoices. The Tribunal also rejected the contention made by
the counsel for the
34
company that the valuation made by the Collector was
exorbitant. As regards the question of imposing fine and
penalty also the Tribunal found the order of the Collector
as correct. and did not find any cogent reason to interfere
in the order of the Collector.
We have heard Mr. Dholakia for the appellants and Mr.
Kapil Sibley learned Addl. Solicitor General for the re-
spondents.
It was argued by Mr. Dholakia that the Tribunal commit-
ted a serious error in holding that the invoices submitted
by the company were undervalued and could not be relied upon
for determining the correct value of the goods imported. It
was contended that the Collector Customs was not correct in
determining the value of the imported goods on the basis of
the quotations of M/s. Shun Hing Technology Ltd., Hongkong.
The quotation of Shun Hing indicated prices at Hongkong and
not the place of importation. There was no other material on
record to determine the value of the imported goods. It was
thus contended that in the absence of any other relevant
material, the invoice price has to be taken as the basis for
valuation. It was also submitted that there was no justifi-
cation in discarding the price shown in the invoices which
contained the correct value of the goods imported and in
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case of Customs authorities were not placing reliance on
such prices mentioned in the invoices. then the burden lay
on the Customs department to find out the correct value of
the goods by collecting material and other adequate evidence
before enhancing the value of the imported goods. The onus
to prove the charge of undervaluation against the company
was on the Customs department and the evidence relied upon
by them, as contained in the adjudication order. is not at
all sufficient to discharge that onus. It was further argued
that any reliance placed on the quotations furnished at the
time of submitting the application for grant of licence was
wholly erroneous. At the time of submitting the application
for grant of licence the prices are quoted for fixing the
upper limit of the value of the licence. When the actual
purchase transactions were entered into, the company negoti-
ated for the price and having regard to the quantum of
purchase and the prospects of future sales, the company was
given 25% ,’ count by the suppliers. It was also submitted
that the prices quoted by M/s. Shun Hing Technology Ltd.,
Hongkong were not the value of the components imported by
the company in SKD/CKD form of plain paper copiers. Thus any
price quoted by M/s. Shun Hing can never form any basis for
arriving at a proper and correct valuation of the goods
imported by the company in the present case.
35
On the other hand it was submitted by the learned Addl.
Solicitor General that it has been admitted by Sh. P.N.
Sadanand, Managing Director of the company in his statement
dated 10.3.87 that the goods imported in the present case by
the company were of Japanese origin and manufactured by M/s.
Matushita Electric Company Ltd., Japan. M/s. Shun Hing
Technology Ltd., Hongkong were the authorised agents of M/s.
Matushita Electric Co. Ltd., Japan, who are the manufactur-
ers of Panasonic copies. He further admitted that normally
the Panasonic copies were supplied to Hongkong in fully
assembled form and then they were dismantled in Hongkong by
the agents and thus supplied in India in SKD/CKD form. Sh.
Sadanand admitted to have visited Hongkong during January,
1987 alongwith his Engineer Sh. K.S. Radhakrishan for pur-
chase of 10 copiers--6 Nos. Model EP 1300 and 4 Nos. Model
EP 2625 and that he alongwith the Engineer dismantled the
fully assembled copiers. It was submitted that the goods
contained in the cartons comprised of all the parts required
for full and complete assembly of copiers. At the time of
examination of the goods covered by Bill of Entry No. 4993
dated 11.3.87, it was found that out of the six cartons,
four cartons were the original cartons used for packing
fully finished/assembled copiers Model EP 2625. The descrip-
tion, model number, brand, manufacturer and country of
origin/manufacture of the copier (viz. Plain Paper Copier EP
2625 Panasoni, Matushita Electric Co. Ltd. and Japan respec-
tively) were clearly marked on these four cartons, one set
of cassettes, trays, covers, one drum, one developer unit
and a bottle of developer. It was thus argued that the
original packing cartons used for packing fully finished
copiers are normally supplied only if fully finished copiers
are purchased. It was submitted that the adjudicating au-
thority has given detailed reasons for showing that the
goods imported were not components of plain paper copiers as
declared. In fact, the company had purchased 14 fully fin-
ished copiers 10 in Hongkong and 4 in Singapore and had then
dismantled for importing the same in the guise of components
of copiers. The company had submitted application for ap-
proval of their phased manufacturing programme to the Devel-
opment Commissioner, Small Scale Industries Govt. of India,
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New Delhi in July, 1986 and alongwith this application they
had also submitted the quotations received by them from M/s.
Shun Hing Technology Ltd., Hongkong which covered all the
items imported except a few items like toner, drum and table
for model FP 2625. The company in the present case not only
violated the terms and conditions of licence but also com-
mitted a complete fraud in importing fully finished copiers
which was a totally prohibited item, in the guise of sepa-
rate components and accessories by dismantling the fully
finished copiers. In the above
36
circumstances the adjudicating authority was fully justified
in not believing the value mentioned in the invoices and in
placing reliance on the prices mentioned in the quotations
given by M/s. Shun Hing Technology Ltd., Hongkong. It was
further argued by Mr. Sibbal that the prices quoted by M/s.
Shun Hing were based on the prices given by the manufactur-
ers i.e. M/s. Matushita Electric Co. Ltd., Japan and there
was no question of supplying the components of the copiers
on a lesser price than given by the manufacturers them-
selves. The company had a special relationship with M/s.
Shun Hing Technology Ltd., Hongkong as a sort of collabora-
tor with no formal agreement and that M/s. Paralax Industri-
al Corp., Hongkong were in turn agents of M/s. Shun Hing
Technology Ltd., Hongkong.
We have considered the submissions made by learned
counsel for the parties. Section 14 of the Act provides for
valuation of goods for the purpose of assessment. Section
14(1) which is relevant for our purposes reads as under:
14. "Valuation of goods for purposes of assessment:
(1) For the purposes of the Customs Tariff Act, 1975 (51 of
1975), or any other law for the time being in force whereun-
der a duty of customs is chargeable on any goods by refer-
ence to their value, the value of such goods shall be deemed
to be the price at which such or like goods are ordinarily
sold, or offered for sale, for delivery at the time and
place of importation or exportation, as the case may be, in
the course of international trade, where the seller and the
buyer have no interest in the business of each other and the
price is the sole consideration for the sale or offer for
sale:
Provided that such price shall be calculated with reference
to the rate of exchange as in force on the date on which a
bill of entry is presented under Section 46, or a shipping
bill or bill of export, as the case may be, is presented
under Section 50."
According to the above provision the value of the goods
shall be deemed to be the price at which such or like goods
are ordinarily sold, or offered for sale, for delivery at
the time and place of importation, in the course of interna-
tional trade where the seller and the buyer have no interest
in the business of each other and the price is the sole
consideration for the sale or offer for sale. In the present
case the
37
company itself had produced a copy of the quotations re-
ceived by them from M/s. Shun Hing Technology Ltd., Hongkong
in respect of the copiers and other items imported alongwith
their application for approval of their phased manufacturing
programme. The company itself having produced these quota-
tions, they cannot dispute the correctness of the prices
mentioned therein. The company has not only not disputed the
correctness of these quotations but has not produced any
other material on record to show that the value mentioned in
the invoices was the correct market value of the goods
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imported at the relevant time. The adjudicating authority in
these circumstances was perfectly justified in taking the
prices mentioned in the quotations as a basis for determin-
ing the correct value of the imported goods.
Mr. Dholakia next contended that the Tribunal itself had
set aside the finding of the adjudicating authority on the
question of treating SKD/CKD packs of the copiers imported
comprised of all the 100% components of copiers. The company
had tried to practice a fraud in defeating the import policy
itself. The intention and purpose of the import policy was
to give incentive and encouragement to the new entrepreneurs
establishing small scale industries and in the first phase
to import 62% of the components of the copiers and the
balance of 38% was to be manufactured by them indigenously.
According to the import policy this percentage of 62% was to
be reduced in the subsequent years. The import policy was
not meant for such entrepreneurs who instead of importing
62% of the components, imported 100% of the components of a
fully finished and complete goods manufactured by a foreign
country. It is an admitted position that fully finished
plain paper copiers were a prohibited item for import and
thus the device adopted by the company in the present case
was a complete fraud on the import policy itself. Apart from
the above circumstances in our view the Tribunal was not
right in setting aside the finding of the adjudicating
authority and in taking the view that one has to look into
the respective licence and not to the fact that if all the
consignments covered by all the bills of entry assembled
together, there will be a full and complete machinery.
It is an admitted position that goods covered by the
three bills of entry Nos. 2044, 2045 and 2046 were all dated
3.2.87 and had been shipped from Hongkong on the same day
i.e. on 21.1.87. The entire goods had arrived on the same
day and by the same flight on 30th January, 1987. The goods
covered under the three bills of entry have been supplied by
the same supplier viz. M/s. Paralax Industrial Corp., Hong-
kong. The goods covered by these bills of entry are ten
numbers
38
copiers in SKD/CKD condition, accessories, spares, consuma-
bles and excess items. The goods covered by the 4th bill of
entry are four numbers copiers in SKD/CKD condition and
consumables. the licence produced is valid for certain
components and is not valid for fully assembled copiers. The
fully assembled copiers are the end products of the import-
ers and hence cannot be imported by them. Plain Paper Copi-
ers are electronic equipments.
The case Union of India v. Tara Chand Gupta & Bros.
(supra) lends no assistance to the appellants in the facts
and circumstances of the present case. In the above case
Tara Chand & Bros. held an import licence dated July 10,
1956 permitting them to import parts and accessories of
motorcycles and scooters as per Appendix XXVI of the Import
Policy Book for July-December, 1956. Under the said licence,
the respondents in that case imported certain goods which
arrived in two consignments, each containing 17 cases by two
different ships. According to the respondents, the goods so
imported by them were motorcycle parts which their licence
authorised them to import. The Customs authorities, on the
contrary held, on the examination of the goods, that they
constituted 51 sets of "Rixe Mopeds complete in a knocked
down condition". After holding an inquiry the Deputy Collec-
tor directed confiscation of the said goods with an option
to the respondents to pay certain sums in lieu of confisca-
tion and also personal penalties. That order was passed on
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the basis that the goods imported were not parts and acces-
sories of motorcycles and scooters presumably under entry
295 of the Schedule to the Import (Control) Order but were
motorcycles/scooters in completely knocked down conditions,
prohibited under remark II against entry 294, a licence in
respect of goods covered by it would authorise import of
motorcycles and scooters. The Deputy Collector held that
though the goods were not in completely knocked down condi-
tion it made no difference as the tyres, tubes and saddles
were easily obtainable in India and their absence did not
prevent the machines being otherwise complete. He also found
that there was a trade practice under which traders were
supplying motorcycles without tyres, tubes and saddles
unless the purchaser specially asked for these parts. Ac-
cording to him the goods could not be regarded as spare
parts but were "Moped in disassembled condition." The re-
spondents in the above case filed a civil suit and the
matter went in appeal to the High Court. The Letters Patent
Bench of the High Court held that the Collector’s jurisdic-
tion was limited to ascertain whether or not the goods
imported by the respondents were spare parts and accessories
covered by entry 295 in respect of which they undoubtedly
held the licence, and therefore, he could not have
39
lumped together the two consignments which. though imported
under one licence, arrived separately and were received on
different dates and could not have come to the conclusion
that the plaintiffs had imported 51 "Rixe" Mopeds in com-
pletely knocked down condition. The respondents were enti-
tled to import the said goods and therefore. Section 167(8)
of the Sea Customs Act did not apply and the respondents
consequently could not have been held guilty of breach
either of that Section or Section 3 of the Imports & Exports
(Control) Act. It was further held that the decision of this
Court in Girdhari Lal Bansi Dhar v. Union of India, [1964] 7
SCR 62 did not over rule but only distinguished judgment in
D.P. Anand v. Mls. T.M, Thakore & Co., C.A. No. 4/1959
decided on August 17, 1960 (H.C.) and therefore, the binding
force of that decision remained unshaken. The Union of India
came in appeal to this Court by grant of certificate. This
Court held as under:
"Under entry 295, except for rubber tyres and tubes for
whose import a separate licence could be obtained under
entry 41 of Part V, there are no limitations as to the
number or kind of parts or accessories which can be imported
under a licence obtained in respect of the goods covered
thereunder. Prime facie, an importer could import all the
parts and accessories of motor cycles and scooters and it
would not be a ground to say that he has committed breach of
entry 295 or the licence in respect of the goods described
therein, that the parts and accessories imported. if assem-
bled, would make motor cycles and scooters in CKD condition.
3There are no remarks against entry 295. as there are
against entry 294, that a licence in respect of goods cov-
ered by entry 295 would not be valid for import of spares
and accessories which, if assembled, would make motor cycles
and scooters in CKD condition. Apart from that, the goods in
question did not admittedly contain tyres. tubes and sad-
dles, so that it was impossible to say that they constituted
motor cycles and scooters in CKD condition. The first two
could not be imported and were in fact not imported because
that could not be done under the licence in respect of goods
covered by entry 295 which expressly prohibited their import
and a separate licence under entry 41 of Part V would be
necessary. The third, namely. saddles were not amongst the
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goods imported. No doubt, there was, firstly, a finding by
the Collector that a trade practice prevailed under which
motor cycles and scooters
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without tyres, tubes and saddles could be sold. Secondly.
the tyres and tubes could be had in the market here and so
also saddles, so that if an importer desired, he could have
sold these goods as motor cycles and scooters in CKD condi-
tion. The argument was that since there was a restriction in
entry 294 against imports of motor cycles and scooters in
CKD condition, the importer could not be allowed to do
indirectly what he could not do directly.
The argument apparently looks attractive. But the question
is what have the respondents done indirectly what they could
not have done directly. In the absence of any restrictions
in entry 295, namely, that a licence in respect of goods
covered by entry 295 would not be valid for import of parts
and accessories which. when taken together. would make them
motor cycles and scooters in C.K.D. condition. the respond-
ents could import under their licence all kinds and types of
parts and accessories. Therefore, the mere fact. that the
goods imported by them were so complete that when put to-
gether would make them motor cycles and scooters in C.K.D.
condition. would not amount to a breach of the licence or of
entry 295. Were that to be so, the position would be anoma-
lous as aptly described by the High Court. Suppose that an
importer were to import equal number of various parts from
different countries under different indents and at different
times, and the goods were to reach here in different con-
signments and on different dates instead of two consignments
from the same country as in the present case. If the conten-
tion urged before us were to be correct, the Collector can
treat them together and say that they would constitute motor
cycles and scooters in C.K.D. condition. Such an approach
would mean that there is in entry 295 a limitation against
importation of all parts and accessories of motor cycles and
scooters. Under that contention, even if the importer had
sold away the first consignment or part of it, it would
still be possible for the Collector to say that had the
importer desired it was possible for him to assemble all the
parts and make motor cycles and scooters in C.K.D. condi-
tion. Surely, such a meaning has not to be given to entry
295 unless there is in it or in the licenee a condition that
a licensee is not to import parts in such a fashion that his
consignments, different though they may be, when put togeth-
er would make motor cycles and
41
Scooters in C.K.D. condition. Such a condition was advisedly
not placed in entry 295 but was put in entry 294 only. The
reason was that import of both motor cycles and scooters as
also parts and accessories thereof was permitted, of the
first under entry 294 and of the other under entry 295. A
trader having a licence in respect of goods covered by entry
294 could import assembled motor cycles and scooters, but
not those vehicles in C.K.D. condition, unless he was a
manufacturer and had obtained a separate licence therefore
from the Controller of Imports who, as aforesaid. was autho-
rised to issue such a licence on an ad hoc basis. Thus the
restriction not to import motor cycles and scooters in
C.K.D. condition was against an importer holding a licence
in respect of goods covered by entry 294 under which he
could import complete motor cycles and scooters and not
against an importer had a licence to import parts and acces-
sories under entry 295.
If Dr. Syed Mohammad’s contention were to be right we would
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have to import remark (ii) against entry 294 into entry 295,
a thing which obviously is not permissible while construing
these entries. further, such a condition, if one were to be
implied in entry 295, would not fit in, as it is a restric-
tion against import of motor cycles and scooters in C.K.D.
condition and not their parts and accessories. There is,
therefore, no question of a licensee under entry 295 doing
indirectly what he was not allowed to do directly. What he
was not allowed to do directly was importing motor cycles
and scooters in C.K.D. condition under a licence under which
he could import complete motor cycles and scooters only.
That restriction, as already observed,’ applied to a licen-
see in respect of goods described in entry 294 and not a
licensee in respect of goods covered by entry 295.
The result is that when the Collector examines goods import-
ed under a licence in respect of goods covered by entry 295
what he has to ascertain is whether the goods are parts and
accessories, and not whether the goods, though parts and
accessories, are so comprehensive that if put together would
constitute motor cycles and scooters in C.K.D. condition.
Were he to adopt such an approach, he would be acting con-
trary to and beyond entry 295 under
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which he had to find out whether the goods imported were of
the description in that entry. Such an approach would, in
other words, be in non-compliance of entry 295."
This Court distinguished the case of Girdhari Lal Bansi
Dhar (supra) by making the following observation:
"It will be noticed that the Bombay decision in D.P. Anand’s
case was not dissented from but only distinguished, and
therefore, the High Court in the present case was justified
in following it. It is true, however, that counsel for the
appellant there relied on that decision in support of his
proposition that a ban on completed article cannot be read
as a ban on the importation of its constituents, which, when
assembled, would result in the prohibited article, and this
Court pointed out in answer that in D.P. Anand’s case, the
imported components could not have when assembled, made up
the completed article because of the lack of certain essen-
tial parts which admittedly were not available in India and
could not be imported. The real distinction, however, be-
tween the two cases was that the decision of the Collector
in D.P. Anand’s case was not, as was the decision in Gird-
bari Lal’s case under which of the two competing entries the
imported goods fell but that the imported goods in question,
if assembled together, would not be the goods covered by the
entry, and therefore, not the goods in respect of which the
licence was granted. Further, the articles in question, even
when assembled together, were not prohibited articles as in
Girdhari Lal’s case. Girdhari Lal case is clearly distin-
guishable because it is not as if motor cycles and scooters
are prohibited articles as was the case there. The restric-
tion is not against licensees importing motor cycles and
scooters under entry 294 and parts and accessories under
entry 295 but against the licensees under entry 294 import-
ing motor cycles and scooters in CKD condition. The question
in the instant case was not under which of the two entries,
294 or 295, the goods fell, but whether the goods were parts
and accessories covered by entry 295."
In our view the Tribunal was not correct in placing
reliance on the case Union of India v. Tara Chand Gupta &
Bros. (supra) in the facts and circumstances of the present
case. In the case before us the
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import of fully assembled copiers was prohibited. The appel-
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lant was only entitled to import 62% of the components. As
already mentioned above, the device adopted by the appellant
in the present case was a complete fraud on the Import
Policy and the appellant was doing indirectly what he was
not permitted to do directly. We are further of the view
that the facts in the present case are more akin and similar
to the facts of the case Girdhari Lal Bansi Dhar v. Union of
India, (supra) which was distinguished in the case of Union
of India v. Tara Chand Gupta & Bros. (supra).
Mr. Dholakia also tried to assail the finding recorded
by the Collector and upheld by the Tribunal and argued that
the components imported by the appellant tallied with the
parts which were permitted under the licence. We do not find
any force in this submission. The Collector has given de-
tailed reasons for holding that the imported goods were not
covered by the valid licence and the Tribunal having upheld
such finding, the same cannot be challenged by the appellant
before this Court.
Mr. Dholakia also submitted that in the facts and cir-
cumstances of the case the order confiscating the goods and
imposing fine and penalty both on the company and Sh. Sada-
nand, the Managing Director was too high and ought to be
reduced.
We find no force in this submission as well. This is a
case where the appellant had not only violated the terms and
conditions of the licence but also committed a fraud on the
Import Policy itself. Thus we find no ground or justifica-
tion to reduce the penalty or fine.
In the result we find no force in these appeals and the
same are dismissed with one set of costs.
P.S.S. Appeals dismissed.
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