Espi Industrial Corporation Vs. Collector of Customs - Court Judgment

Excerpt:
1. this is an appeal filed by m/s. espi industrial corporation, new delhi against the order-in-original no. sg-81/83a/s/10-56/84-l siib, dated 7-2-1985 of the additional collector of customs enforcing terms of bond for a sum of rs. 10,00,000/- towards fine in lieu of confiscation of goods imported under b/e no. 2783/25 by the importer and also levying a fine of rs. 10,00,000/- in lieu of confiscation of goods valued at rs. 20,26,500/- imported under b/e no. 2783/24 by the same importer. m/s. espi industrial corporation imported the aforesaid two consignments consisting of components of belarus tractors umz per s.s. nikolay aananiev, and claimed their clearance under o.g.l. in appendix 10 serial no. 1 of the a.m. 84 policy. the customs house objected to the clearance of these consignments.....

Judgment:
1. This is an appeal filed by M/s. Espi Industrial Corporation, New Delhi against the Order-in-Original No. SG-81/83A/S/10-56/84-L SIIB, dated 7-2-1985 of the Additional Collector of Customs enforcing terms of bond for a sum of Rs. 10,00,000/- towards fine in lieu of confiscation of goods imported under B/E No. 2783/25 by the importer and also levying a fine of Rs. 10,00,000/- in lieu of confiscation of goods valued at Rs. 20,26,500/- imported under B/E No. 2783/24 by the same importer. M/s. Espi Industrial Corporation imported the aforesaid two consignments consisting of components of Belarus Tractors UMZ per s.s. Nikolay Aananiev, and claimed their clearance under O.G.L. in Appendix 10 Serial No. 1 of the A.M. 84 policy. The Customs House objected to the clearance of these consignments under the O.G.L. on the grounds that the importer's registration certificate with" the Director of Industries carried the endorsement of "Tractor" on provisional basis as an additional item of manufacture, that the goods imported were tractors in dis-assembled version, that the importers did not submit to the Customs authorities a copy of their application to the Director of Industries showing their manufacturing program, that the goods under import were categorised as capital goods and required a capital goods import licence for their importation and that certain goods as mentioned in the show cause notice did not in any case come within the purview of O.G.L. in Appendix 10 Serial No. 1 as they fell within the category of banned/restricted goods in Appendices 3 and 5 of the Policy. After observing the due process of adjudication, the Additional Collector of Customs passed the impugned order which is before us in appeal.

2. The learned advocate, Shri J.R. Gagrat argued that the appellant was a manufacturer in the small scale industrial sector with registration certificate valid to cover the imported goods. An objection had been taken that in the manufacturing programme, the appellants had submitted that they would undertake the manufacture of tractors mainly with indigenous components. Instead, the appellants imported tractors in knocked down condition. The second objection was that the registration authorities had only granted the provisional endorsement to the appellants for the manufacture of tractors. When the case was adjudicated, more than a, year had lapsed since the making of the endorsement and the provisional endorsement had also expired. Ancillary points taken up were that the Import Policy was amended on 12-1-1984 under which components of tractors were taken out of the O.G.L. and put under the category of restricted/ banned goods. The department had also relied on the rules of interpretation under CCCN to show further that the goods imported were tractors in knocked down condition and not components of tractors. Referring to the facts of the case the learned advocate stated that M/s. Espi Industrial Corporation was established at Faridabad on 1-9-1978. On 6-7-1983, the item "tractor" was added to their certificate of registration on provisional basis. Before that, the Company had enlarged the activity by undertaking registration for manufacture of Combine Harvesters and Seed cleaners. 260 such machines were put out in the market. On 31-3-1983, the Company applied for the manufacture of Paddy Transplanters and Tractors and vide their letter dated 31-3-1983, the Company approached the General Manager, Dist, Industries Centre, Faridabad to add "Tractors and Paddy Transplanters" to their registration certificate as he was the correct sponsoring authority in this behalf. A writeup on the technology on the manufacture of tractors and paddy transplanters was also submitted with this application and as per this write-up, the Company was to import 70% of the parts for tractors initially and gradually switch over to greater indigenisation. The advocate submitted that this answered the Collector's charge that no manufacturing plan was submitted by the importers to the sponsoring authority and that therefore this allegation was not true. In addition, the Company also submitted the required documents to the sponsoring authority including the technical plan of manufacture with the Company's letter dated 1-7-1983. An annexure to this letter included the specifications of deleted parts which the Company included in phase 1 of its programme. As per phases 2 and 3 some more items were sought to be deleted from the import requirements. The advocate submitted that the goods imported were covered under O.G.L Appendix 10 Serial No. 1 and the goods had been imported before the expiry of the validity of the endorsement for the manufacture of tractors. On 29-7-1983, the Company had signed the contract for the supply of 1000 sets of components of Agricultural tractors UML 6AM with the Soviet suppliers. The specifications as enclosures to the contract also gave the phased manufacturing programme of the appellants. These were the same as those submitted to the sponsoring authority. These documents would answer the allegation that the intention of the Company was to import the whole tractors in knocked down condition. The appellants placed who indents on 8-7-1983 and 25-8-1983 for 50 sets each and these were covered by Ls/C dated 26-7-1983 and 24-8-1983, respectively. Thereafter, revised indents were placed on 9-12-1983 and the two Ls/C were amended on 12-12-1983. Thus, the Company entered into bonafide firm commitments for the import of the tractor parts. Referring to Para 239(2) of the A.M. 84 Policy Book, the advocate stated that the imported goods were components required by an Actual User and the import was accordingly permissible under Appendix 10 Serial No. 1 covering raw materials for the manufacture of finished tractors. The advocate also drew our attention to the provisions of para 242(3) which advises the Actual Users to seek clarification from DGTD for importing goods under the OGL. As per these provisions the Company had sought clarification from DGTD and had obtained it vide DGTD's letter dated 7-10-1983. The advocate drew our attention to this clarification, a copy of which has been filed in the paper book. Referring to this clarification, he stated that the items mentioned in it were held classifiable under Entry No. 89 of Part I of list 8 of Appendix 10 of the Import Policy. This was also mentioned in the B/E for the imported goods. The shipments of the goods were made on 13-2-1984 and the Bs/E were presented to the Customs on 19-4-1984 and 25-4-1984. The declaration required for claiming the benefit of clearance under OGL was also submitted in the Company's letter dated 23-4-1984. This was a proper declaration in terms of Para 21 of Appendix 10 page 151 of A.M. 84 Policy Book. The conditions govering the imports under OGL were listed on page 149 of the Policy Book. Para 21(a) stipulated that all Actual Users at the time of clearance of the goods shall furnish to the Customs authorities a declaration giving particulars of their industrial licence or registration as an Actual User with the concerned authority. This condition had to be interpreted that the required declaration should be filed with the B/E and not subsequently as there was a time lag in the clearance of the goods. In that case, the declaration filed by the appellants was valid because at that time, the endorsement made regarding "Tractors" was current and valid on the appellant's registration certificate. The time of clearance was therefore to be interpreted in terms of filing of the B/E Under Section 46 of the Customs Act. As regards the question as to whether the goods were covered under OGL, the importers had obtained a special clarification from DGTD and this was binding on the Customs authorities. The advocate drew our attention to a further clarification from the Development Commissioner, Small Scale Industries in his letter dated 16-7-1984. On 12-1-1984, there was a change in the policy by issue of a Notification under which the components of tractors were removed from the OGL. However, as clarified in the Government's letter dated 19-3-1985, the components were allowed to be imported if irrevocable L/C had been opened before the date of notification namely 12-1-1984. The advocate repeated his contention that the two Ls/C had been opened before the crucial date for the imports under appeal and hence as per this clarification, the imports were eligible to the benefit of the OGL without the restrictions. As regards the Customs contention that as per para 244 of the Policy Book, the rules for interpretation of the Customs Tariff would apply to the classification of the goods under the import policy and that therefore the goods imported were tractors and not raw materials and components falling under OGL, the advocate submitted that he had obtained a specific clarification from the DGTD as advised under Para 242(3) and hence the provisions of Para 244 would not apply. The advocate also referred to the supplier's clarification in their letter dated 16-7-1984 which tried to remove the objections raised by the Customs authorities. The advocate also referred to the Miscellaneous Application registered under No. 151/85 and requested inter alia that the detention certificates should be issued for both the consignments to save them from enhanced demurrage charges. He stated that under this application, a request had also been made for taking on record additional evidence Under Rule 23 of the CEGAT Procedure Rules, 1982. The advocate drew our attention to the Press Note No. 15 dated 17-6-1985, particularly Para 4 thereof and urged that as per this press note, broad banding of manufacturing programme was permitted. The Company had applied for inclusion of tractors in their industrial licence No. IL : 71(85) dated 28-2-1985 in its letter dated 21-6-1985 and the request had been granted vide the Government's reply in their letter dated 28-2-1985.

The advocate also drew our attention to the certificate issued by the Officer on Special Duty on 19-8-1985 to show that M/s. Espi Industrial Corporation were holding a valid industrial licence No. IL : 71(05) dated 20th February, 1985 duly endorsed on 18th "July, 1985 for the manufacture of Agricultural Machinery i.e. Tractors, Power Tillers, Harvester combines and other tractors based derivates and have an approved Manufacturing Programme for Tractors. This certificate squarely covered the goods under appeal. The advocate also referred to the Ministry of Industries' letter dated 19-8-1985 addressed to the Assistant Collector of Customs, which certified that components for 50 numbers tractors had already been utilised and it also gave a certificate in respect of remaining components of 50 numbers tractors which were yet to be cleared from the Customs. The advocate referred to para 7 of the Miscellaneous Application and requested that the additional evidence may be taken on record. He relied in this behalf on the judgment of the Madras High Court vide 1974-75 ITR page 109 and CEGAT's order in the case of Rakesh Press v. Collector of Customs, Bombay a copy of which was submitted to show that in case of goods covered by confirmed letter of credit, the change in ITC policy subsequent to the owning of the confirmed L/C would not matter and that the goods could be allowed clearance under the earlier ITC policy. The advocate also relied on the order of the Board in the case of Kantilal Manilal & Co. 1981 ELT page 75. In view of these submissions, he requested that the Collector's order be set aside and the appeal should be allowed.

3. The learned Senior Departmental Representative Shri Pal at the outset opposed the tendering of additional evidence through the appellant's miscellaneous application No. 151/85. He stated that this evidence was not in existence when the order was passed and hence this evidence should not be taken into account. Coming to the facts of the case, Shri Pal stated that both the Bs/E were assessed on the same date, namely, 3-7-1984 and both the consignments were offered clearance on execution of ITC bonds. However, the appellants took clearance of one consignment only under bond. Shri Pal argued that the department took objections to the clearance of the consignments on two grounds.

Firstly, it was held that the importers did not comply with the requirements of Para 21(a) of Appendix 10 of the ITC Policy as they did not possess a valid registration for the manufacture of tractors and they had no manufacturing programme for assembling of tractors. Even in the declaration filed in the B/E filed at the time of clearance of the two consignments, they did not file any manufacturing programme for tractors. Shri Pal referred to the declaration and read out the same.

As regards the appellant's letter dated 31-3-1983, addressed to the District Industries Centre, Faridabad, Shri Pal argued that the importers did not supply earlier to the Custom House the list of enclosures to this letter including the letter on "Technology of tractors and paddy transplanters". Referring to the technical plan submitted by the importers to the sponsoring authority, Shri Pal contended that as mentioned therein, the importers in the plan wanted to procure locally most of the components for the manufacture of tractors as the ancillary industry would meet the specific needs for their components. Therefore, it could not be said that the technical plan covered imports of the components to a large extent. Referring to enclosure 'O' to the importer's application to the sponsoring authority, Shri Pal further contended that this contained a list of the importer's associates who were manufacturing a variety of components for the tractors in India. Therefore, it could not have been the plan of the importers to import the components listed in the enclosures to their application. To confirm the suspicions, the department had addressed a telegram to the Director of Industries, Haryana and the Customs had also received a reply which the learned SDR read out. He stated that these were incorporated in the order under appeal. Hence the Customs Department had correctly objected to the clearance of the consignments under OGL. Shri Pal further added that the Customs had addressed the General Manager of the District Industries Centre, Faridabad regarding the endorsement made by him on the registration certificate of the importers with a view to finding out why the endorsement was provisional and whether the same had been extended after expiry of the original period of one year. But no reply was received from the General Manager. The second objection which the Customs had raised against the clearance of the goods was as to whether the goods should be treated as components for the purpose of levy of duty or as tractors in knocked down condition. In this behalf, Shri Pal referred to the Additional Collector's observation in his order-in-original to the effect that the Customs had levied the duty provisionally on the two consignments. Referring to Serial No. 1 of Appendix 10, Shri Pal argued that the provisions of the OGL were subject to the restrictions under Appendices 3 and 5 and certain components came within the restrictions under Appendices 3 and 5. These items were (1) Power packs which are diesel engines and which come under Serial No. 470 of Appendix 3; (2) front axle wheel assembly which would come under Serial No. 413 of Appendix 5; (3) Hydraulic steering assembly and hydraulic control assembly which would come under Serial No. 432 (17) of Appendix 3; and (4) rear rims with tyres and tubes which would fall under Serial No. 351 of Appendix 3. The values of the respective offending goods of the 4 categories had also been given in the show cause notice and the adjudication order. In any case, the components of these four categories cannot be cleared under O.G.L. as the same fell within the category of banned/ restricted items.

4. Shri Pal further added that the total value of the two consignments came to Rs. 35,13,687/-. The Import (Control) Order, 1955 has the Indian Customs Tariff Annexed as Schedule I. Note 1 of this schedule gave the indication about interpreting the schedule for the import trade control purpose. The effect of this was that the Schedule I to the Import (Control) Order and the Customs Tariff had to be interpreted identically. In the present case the tractors were imported in semi-knocked down condition pack, and hence it would be legitimate and proper to classify them as such and not as component parts of the tractors. Tractors were classified under Serial No. 87.01 of the Tariff while motor vehicles were classified under Serial No. 87.02. Both were referred as separate items. Shri Pal contended that automotive parts did not include the tractor parts. ITC Public Notice No. 2/84, dated 12-1-1984 had included 'components of tractors' and 'combine harvesters' under Appendix 3 at Serial No. 460-A and therefore, the import of components of tractors had been banned under this entry. The appellants had not given any explanation regarding the ban on the import of components of tractors. The importers' reliance on para 143, page 43 of the Policy AM. 84 to show that motor vehicles would include tractors or not was not apt as this entry was with relation to import of samples by registered exporters. In view of the aforesaid submissions Shri Pal prayed for dismissing the appeal.

5. In reply, Advocate Shri Gagrat stated that the appellants' explanation dated 13-8-1984 to the show cause notice clarified the various aspects of the controversy. Drawing attention to this explanation Shri Gagrat reiterated that the registration certificate had not been withdrawn at the time of import of the goods, and hence the appellants are entitled to avail the benefit of OGL. The Collector had not commented in detail on the explanation in his adjudication order. The Collector relied on the telegram dated 11-6-1984 from the Director of Industries, Haryana, turning down the recommendation of the imported goods against M/s. Espi Industrial Corporation. The Advocate ' stated that this action was not correct as the importer's application and the enclosures for obtaining the registration were not sent to the Customs Authorities. A detailed programme of manufacture was submitted to the sponsoring authority and the appellants had obtained a valid registration certificate which was in existence at the time of imports.

Referring to the Press Note No. 13, dated 17-6-1985 of the Government of India, Department of Industrial Development, a copy of which has been submitted with the appellants' Miscellaneous Application No.151/85, the Advocate state that the Government had permitted import of various articles under the broad banding scheme for the purposes of industrial licensing, and the appellants' C.O.B. licence No. IL 71(85) dated 28-2-1985, a copy of which had also been submitted with that Miscellaneous Application No. 151/85, permitted the import of the goods in question. As regards the SDR's arguments that certain items were hit by the restrictions under Appendices 3 and 5, the Advocate stated that this argument was not correct as the goods had been imported after obtaining DGTD's clarification as per para 242(3) of the Import Policy.

A copy of the DGTD's letter had also been filed with the paper-book. As an alternative argument he submitted that under Serial No. 433 of Appendix 3 only automotive components are restricted and the goods under import are meant for tractors which would not cover automotive components. AS regards the department's reliance on Serial No. 351 of Appendix 3, the Advocate stated that this applies to rubber products while the imported goods were rear rims with tyres and tubes. Rims were not rubber products and hence Serial No. 351 of Appendix 3 was not attracted. Similarly, the departments' reliance on Serial No. 432 (17) of Appendix 3 was misplaced as this covered hydraulic control assemblies and not steering assemblies under import. Similarly, Appendix 5, Serial No. 413 was not applicable as it covered industrial and marine gears other than for automotive application. The Advocate stated that there was parity of classification between the entries in Appendix 3 with those in Appendix 5. Till the issue of Public Notice No. 2ITC/84, dated 22-1-1984 and inclusion of entry 460A under Appendix 3 tractors and motor vehicle parts were treated on the same footing. He referred to the clarification under para 146 on page 43 of the Policy Book in this behalf. The Advocate further referred to Serial No. A70 under XI, Motor Vehicles and Automotive Ancillaries in Appendix 17, page 198 of AM. 84 Policy to show that there was no distinction between, motor vehicles and tractors. Besides, he argued that Chapter 83 of the Customs Tariff covered tractors and motor vehicles alike. In view of the submissions made by him already, he reiterated his request for allowing this appeal.

6. I have considered the arguments on both the sides. Before discussing the merits of the case, it is necessary to refer to the Miscellaneous Application filed by the appellants and registered under CD No. 151/85.

With this miscellaneous application, the appellant's advocate requested for taking on record certain documents which came in their hands after the appeal was filed. While the Miscellaneous application was posted for hearing before the present appeal, the same was not decided, and the advocate referred to the additional evidence filed with the application in the course of his arguments. In a way, the Bench was thus presented with a fait accompli and hence we have to deal with this application accordingly. Even otherwise, the Tribunal is meant for giving justice and not for seeking shelter behind subterfuge's and technicalities in the dispensation of justice. From this point of view, I feel no objection in taking on record the additional evidence tendered with the Miscellaneous application.

7. The show cause notice alleged and the Additional Collector's order held that the imports in question were not valid because the importers registration certificate with the Director of Industries, Haryana was valid for one year and was provisional in nature. It was further held that at the time of adjudication of the case, the validity of the certificate had expired. The learned advocate for the appellants had contended that the Additional Collector's order is not correct. The importers had a valid certificate at the time of import and this has to be decided in terms of Section 46 when the B/E is filed for the clearances of the goods and not when the Additional Collector decides this case. I find there is a great substance in this argument of the advocate and the same is correct. As regards the provisional nature of the certificate, there would be no objection also provided this endorsement is otherwise valid. However, it was alleged and consequently accepted by the Additional Collector in his impugned order that the import of the goods in question require clearance from the Ministry of Industries as the imports entailed collaboration with foreign suppliers. It was observed by the Additional Collector that the importers were using the name of "Bellares Tractor" and would be marketing the products as Espi-Bellares tractors. In view of this allegation and finding the question for consideration before is whether the provisional certificate granted by the Director of Industries was valid or not. This question is answered by the. additional evidence tendered by the importers in their Miscellaneous Application No.151/85. One of the documents tendered with this application is the Industrial licence No. IL : 71(85) dated 28-2-1985 issued by the Department of Industrial Development to M/s. Espi Industrial Corporation, New Delhi. This licence would show that for the manufacture of tractors, the industrial licence Under Rule 7 of the Registration and Licensing of Undertaking Rules 1952 was necessary and Under Rule 15(2), the competent authority to grant such a licence was the Central Government. Viewing the provisional registration certificate by the Director of Industries, Haryana in the light of the aforesaid provisions of law, it is seen that the Director of Industries had no legal authority to grant the registration certificate in question. It was therefore granted only for a period of one year and that too provisionally. It is therefore obvious that when the Custom House contacted the Director of Industries in this behalf, he chose to maintain silence in this behalf and not reply to the queries of the Custom House. Since the industrial licence was received by the importers on 28-2-1985, the goods could not have been imported by them as actual users and the imports therefore violated the Import Trade Control Order. The imports are accordingly not valid and on this ground alone, the appeal should fail. In view of this finding, it is not necessary to go into the related aspect as to what the manufacturing programme of M/s. Espi Industrial Corporation was, whether it was approved by the Director of Industries and whether this contained the programme for gradual switch over from imported components to locally available ones for the manufacture of the tractors over a period of time. It is therefore also not relevant that no such programme was submitted by the importers to the Custom House. However, it is not adviseable to leave the matter at this stage but go through the entire gamut of arguments presented by the appellants. Another point which has been thrown up by the Additional Collector's findings and the appellant's arguments is whether the goods under import are complete tractors in knocked down condition or tractor parts and components. The department has relied on the Rules of Interpretation under CCCN as made applicable to the ITC policy to show that the imports consist of tractors in knocked down condition and not tractor parts and components. Besides, they have gone by the packing list and the quality control certificate from the suppliers which have described the goods "Tractor UNZ-6AM in dis-assembled version Tractor Parts and Units".

These facts are incorporated in the Additional Collector's order. He has further observed that the packing list stated that the Tractor Units were produced as tropical version and were preserved for a period of one year. The appellants have argued that the Additional Collector's finding is not correct. Referring to Para 239(2) of the Policy Book, the advocate has contended that the goods were tractor parts and components and not complete tractors. The imported goods were minus the components which were to be procured locally as per the manufacturing programme of the appellants. The advocate has also relied on the certificate from the DGTD in the letter dated 7-10-1983 and urged that this should be taken as the authority for clarification of the issue by virtue of the provisions of Para 242(3) of the Policy. The advocate, in other words, has urged that the ruling of the DGTD should be held as final. Viewing the arguments of the advocate, it is seen that the clarification has to be considered in the facts and circumstances of the case. The fact remains as to whether the goods imported were in accordance with the clarification or not. This is a question of fact and cannot be decided on the basis of the DGTD's letter alone. The suppliers themselves have described the goods as Tractors in knocked down condition both in the packing specification as well as in the quality control certificate. Besides under the Rules of Interpretation as urged by the Learned SDR, the goods imported had to be classified on the basis of Note 1 to Schedule I to the Indian Customs Tariff as annexed to the Imports (Control) Order, 1955. As per this Rule of Interpretation, the goods are tractors in knocked down condition and not components and parts thereof. I am in full agreement with Shri Pal's submission in this behalf as a statutory interpretation would prevail over an administrative advice of the DGTD in their letter dated 7-10-1983. It is proper to accept the goods as tractors in unassembled condition minus certain parts which were to be procured locally, but which would not affect the basic character of the imported goods.

Since, on this basis, a legitimate conclusion is reached, that the imported goods are tractors, their import as components and raw materials under Appendix 10 Serial No. 1 is not held as valid and from this angle also the imports violate the Trade Control Regulations. One more argument which Shri Gagrat took up in his written memo of appeal but which he did not press at the time of oral submission is his claim for being given the benefit of the ratio of the Supreme Court's decision in the case of Union of India v. Tarachand Gupta [AIR 1971 SC 1558]. In this case, the Honourable Supreme Court was interpreting the licence given to Tarachand Gupta & Brothers for items covered by Serial No. 294 of Section 2 of Part IV of Schedule I of the Import Trade Control Policy for the period July-December, 1956. In this case, the Honourable Supreme Court held that two separate consignments of parts of motor cycles/scooters could not be construed to mean import of motor cycles/scooters in CKD condition. In view of the separate policies for the imports of parts and for motor cycles/scooters in CKD condition under Serial Nos. 294 and 295 of Section 2 of Part IV of Schedule I and the remarks against Serial No. 295, the Supreme Court held that the import of the parts in two different consignments did not amount to the import of motor cycles/scooters in CKD condition. A benefit of this decision is claimed by the appellants in the present instance. While the imports considered by the Supreme Court and by us in the present appeal constitute motor cycles and tractors in CKD condition, the two imports have to be viewed in their respective contexts. In the case of Tarachand Gupta and Brothers, they held the licence for the import of parts for motor cycles/scooters under Serial No. 294. The Collector of Customs extended the remarks appearing under Serial No. 295 to the licence issued under Serial No. 294 to deny the clearance of the motor cycle/scooter parts to M/s. Tarachand Gupta and Brothers. The Supreme Court clearly held that this was not warranted and accordingly turned down the appeal of Union of India. In the present case, the import is against OGL for raw materials, components and consumables other than those restricted or banned. However, as per the packing list and quality control certificate of the suppliers, the goods imported are described as tractors in dis-assembled condition. Therefore, the OGL is not valid to cover the import of complete units. Apart from that, the present importation has been interpreted on the basis of Note 1 to Schedule I of the Import Control Order 1955 to construe that the goods imported are tractors in knocked down condition. This Rule of interpretation came into existence only with the enactment of the Customs Tariff Act, 1975. It was not available at the time when the Honourable Supreme Court decided the case of Tarachand Gupta and Brothers. Therefore, the present case is distinguishable from the case of Tarachand Gupta and hence the benefit of the ratio claimed by the advocate of this decision to the present appeal is not available. An argument has also been advanced that the Collector's reliance in calling upon the appellants to submit a licence for "Capital Goods" is not correct as the definition of "Capital Goods" under Para 5(8) of the Policy would not cover the goods in question. However, this argument also was not pressed at the time of hearing and in the analysis of the aforesaid case, the same has become irrelevant. It is therefore not necessary to deal with this aspect further. Apart from the objection held by the Additional Collector to the import of the two consignments, he has held that 4 items namely, Power Packs, Front Axle wheel assembly, Hydraulic steering assembly and Hydraulic control assembly, and Rime with tyres and tubes do not come within the purview of OGL under Appendix 10 Serial No. 1 in any event, as these are covered by specific Serial Numbers under Appendices 3 and 5 as restricted items.

The learned advocate has argued that the goods were imported after obtaining DGTD's clarifications and that these are not restricted goods falling within the aforesaid Appendices for the reasons mentioned by him in his written and oral arguments. For interpreting Serial No. 351 of Appendix 3, he has stated that this covers only rubber products and rims would not be covered thereunder. I am afraid such an argument is not valid as Serial No. 565 of Appendix 3 and Serial No. 474 of Appendix 5 lay down that any item having another name or synonym but of the same nature as any of the items covered by these lists should be taken as covered thereunder. The only valid contention of the advocate which is acceptable is the submission that Serial No. 351 of Appendix 3 would not cover the rims. But this does not affect the merits of the case as the imports are otherwise invalid as mentioned above.

8. An argument has also been advanced that the components of tractors and combine harvesters were restricted under Public Notice No. 2/84, dated 12-1-1984 and since the Letters of Credit for the two consignments in question had been opened earlier and firm commitments made for these imports, the consignments should not be treated as coming within the aforesaid restriction. While urging this point, the advocate has taken pains to distinguish the tractor parts from the motor vehicle parts. Similarly, the learned SDR has offered counter arguments to show that the goods imported were of restricted category.

Both the sides have relied on the orders contained in the Handbook and the Customs Tariff in support of their contentions. While it is conceded that the firm commitment for the import of the two consignments was made before the date of issue of the Public Notice 2/84, dated 12-1-1984, the question as to whether the goods are tractor parts or motor vehicle parts is academic in view of the fact that the imports do not fall within the OGL as held above.

9. In the end, a request has been made by the appellants for the grant of a detention certificate by the Tribunal for claiming relief in the wharf rent from the Bombay Port Trust. I observe that this request does not fall within the purview of the Customs Act and hence it cannot be taken cognisance by the Tribunal. The grant or refusal of the detention certificate by the Customs authorities is not a decision under the Customs Act hence it is not appealable to the Tribunal. Besides, it is the practice of the Customs authorities to grant the detention certificate only if the goods are detained by the Customs Officers pending clearance by them. In the present case, the goods were detained squarely on account of the fact that the imports did not qualify for OGL and hence the Customs authorities cannot be attached with the blame for the delay in the clearance of the goods. Therefore, even on merits, the grant of a detention certificate is not warranted. However, it is not necessary for the Tribunal to go into that aspect as observed by me above. It should suffice if an observation is recorded that this matter does not fall within the purview of the Tribunal and hence the Tribunal cannot give the relief in this behalf.

10. In view of the foregoing analysis of the case, I find that the Trade Control Regulations are violated and that the Additional Collector's order is correct both on the grounds of fact and of law. In view of these reasons, I confirm the same and reject the appeal.

Sd/-Bombay, (K.S. Dilipsinhji)18-11-1985 Member (Technical) 11. I have had the advantage of going through the order drafted by brother Shri Dilipsinhji. I respectfully disagree with his conclusions.

Though the order of my brother Shri Dilipsinhji sets out the facts of the case the respective contentions of the parties to the appeal I consider it necessary to advert to the facts, the allegations in the show cause notice and the findings of the Additional Collector.

12. The appellant M/s. Espi Industrial Corporation at the relevant time was a small scale unit engaged in the manufacture of agricultural machinery, implements etc. It was registered with the Director of Industries, Haryana and was granted registration certificate by the General Manager District Centre dated 15-4-1980. Originally the certificate was for the manufacturing/processing activity agricultural machineries/implements. This certificate was amended and the item 'Tractor' was added on 6-7-1983 on provisional basis for a period of one year (vide Exhibit 'C' at page 54 of the paper book).

13. The appellant entered into a contract dated 29-7-1983 with Traktoroexport, Mosco for the import of the 1000 sets of components of agricultural tractors UNZ 6AM with power pack components of engine D65M and rear wheels 15 x 30" (vide Exhibit 'D' page 71) This contract also contained an enclosure Of components which were not to be delivered by the foreign supplier.

14. The appellant placed two indents each for 50 sets on 8-7-1983 vide indent No. 29/83. The appellant also opened two Letters of Credits one on 26-7-1983 and 26-8-1983. These letters of credit were subsequently amended and the period of shipment was extended till 15-2-1984 and the period of negotiation of document till 29-2-1984.

15 The foreign suppliers shipped the goods as per the indents under Bills of Lading Nos. 1 & 2 both dated 23-2-1984. After the ship arrived at Bombay port the appellant presented two Bills of Entry bearing No.2783/24 and 2783/25 dated 12-3-1984 and 19-4-1984 for clearance under Appendix 10(1) of Import-Export Policy 1983-84. The Customs, however, did not permit clearance and the grounds of objections were set out in the show cause notice dated 27-6-1984 issued to the appellant. Briefly stated, the allegations contained in the show cause notice are: (i) Registration granted by General Manager, District Industries Centre, Faridabad for manufacture of Tractor on provisional basis on 6-7-1983 was based on the application made by importer to the said officer. In the application importer had not disclosed their using any imported components in the manufacture of tractors. In terms of the conditions covering import under Open General Licence as it stated in Appendix 10 para 21(1) of Import Policy AM 84 on page 151, it is stipulated that the items imported under OGL, should be strictly in accordance with the terms of registration with the sponsored authority and as per their approved phased manufacturing programme. Further the import requires clearance from Ministry of Industries due to foreign collaborations of the importers. It is ascertained that the importers are using the name of the Belarus Tractor and will be marketing the product as Espi - Belarus Tractors. It is also ascertained that the same description is used in the marketing of the tractors.

(ii) Para 244 of Import Policy Volume I April-March 1984 stipulates that, the rules of interpretation of the first schedule in the Customs Tariff Act, 1975 (51 of 1975) will apply to the clearances of consignments imported under this Policy. As per the provisions contained in the Customs Tariff Act interpretation Rule 2(a) of the Rules for Interpretation of this schedule and the clarification contained in Customs Tariff Nomenclature Explanatory Notes in page 1158 for incomplete machines and unassembled machines, the Tractors when imported in knowck-down condition or in incomplete condition will be assessed to duty as per the essential character of the items that is as Tractor . The goods under import have the essential character of the tractor and they have only some items such as seats, battery, electrical wiring as missing parts. Under the circumstances the essential character of the components under import is tractor and not components of the tractor. The import of tractor is not covered under OGL as per these conditions it is the end-product of the importer. Further, it gathers strength from the fact that the Quality Certificate furnished by importers describes goods as tractor in disassembled version. Even the shipping specifications and packing list describes the goods as such. The import requires specific licence.

(iii) Without prejudice to (ii) above the import inter alia covers power pack components exclusively for tractor. The break up prices of goods has been given in the enclosure to the invoice of imports.

This list covers 15 items in one set for the total value of Rs. 9,761.94 ps. per set. It appears that the goods imported under this category are engine in CKD condition. The Horse Power of the engine is 65 of H.P. Thus value of Rs. 9,76,194/- in two bills of entries is covered by the Appendix 3 of Import Policy as "Diesel Engine upto including 1350 HPs are covered by Serial 470 of Appendix 3 of the Import Policy. This Import Appendix 3 covers items which are listed for limited permissible import and they are excluded from Appendix 10 Serial 1.

(iv) Without prejudice to (ii) above the items front axle with half frame assembly valued at Rs. 3,772.44 each is covered by 413 of Appendix 5 as Industrial Gear Boxes. Likewise, the items Transmission Assembly with differential clutch control brake, rear axle, drive housing etc. valued at Rs. 10,375.68 each is also covered by the same entry. The above goods valued at Rs. 14,14,812/- are not covered by the OGL Appendix 10 Serial (1) of the Import Policy.

(v) Without prejudice to (ii) above Stearing assembly valued at Rs. 1,777.53 each is two Bill of Entry along with Draft Control at Rs. 1,783.32 are hydraulic control assembly and are covered by Item 432 (17) of Appendix 3 of Import Policy AM 84. Thus the goods are not covered for a value of Rs. 3,56,085/- for 100 sets on this account.

(vi) Without prejudice to (ii) above Rear Rims with tyres and tubes are valued at Rs. 7,665.96 each for one set. The tyres and tubes are made of rubber products are covered by Serial 351 of Appendix 3 of the same policy. Thus goods valued at Rs. 7,66,596/- are not covered on this account. The goods listed above valued at Rs. 20,98,875/- and Rs. 14,14,812/- are covered by Appendix 3 and Appendix 5 respectively of Import Policy AM-84 and the items covered by these appendices are excluded from Appendix 10 Serial (1) OGL benefit.

The foregoing facts and circumstances in the case appeared to disclose : (i) That the goods imported and covered by both Bs/E under consideration cover complete tractors and not components of tractors as declared in the Import documents including the Bill of Entry.

(ii) That the item of tractors fall under the category of capital goods and as such they need the capital goods import licence for their importation and no such capital goods import licence has been produced for the clearance through Customs.

(iii) That the imported goods produced appear to have been mis-declared as 'components of tractors' with a view to get them accommodated with in the scope of OGL Appendix 10 Serial (1) and thus circumvent Import Trade Control Regulations and restrictions.

(iv) That the importers have not produced any phase manufacturing programme for approval of the sponsoring authorities, and that they do not have such approval to import any such goods or any such goods from the sponsoring authorities. They have not got the approval of the Ministry of Industries, for the import of designs and drawings irrespective of fact whether or not any payment is involved as per their technical collaboration agreement on being produced to the Government of India for their approval.

(v) That imported goods include engine power pack components stearing assembly, draft control (being hydraulic control assembly) tyre and tubes made of rubber and all these are Appendix '3' items which fell outside the scope of OGL Appendix 10 Serial (1). The total value of the aforesaid items works to Rs. 20,98,875/-.

(vi) The imported goods further include front axle with half frame assembly and transmission assembly with differential Rear Axle etc.

The import of these items would be hit by 413 of Appendix 5 and as such, they are not liable for import under the provisions of OGL of Appendix 10 Serial No. 1. The goods are thus valued at Rs. 14,14,812/- The foregoing appeared to disclose that both the consignments valued at Rs. 35,13,687/- have been imported in breach of provisions of Section 111(d) and 111(m) of the Customs Act, 1962 read with section 3(2) of Imports & Exports Control Act, 1947. Without prejudice to the above, it is also alleged that imported goods are diesel engines, Hydraulic Stearing Control Assembly, tyres and tubes with Rim and Front Axle are the items of Appendix 3 and 5 and therefore do not qualify for release under OGL Appendix 10(1) attracting penal provisions of Section 111(d) of the Customs Act, 1962 read with Section 3(2) of Imports & Exports Control Act, 1947.

16. The appellant submitted a detailed reply by way of written explanation dated 13-8-1984, the reply is found at pages 143 to 160 of the paper book. They also enclosed certain documents to their reply.

17. The Additional Collector of Customs held the enquiry. The Additional Collector firstly held that the import was not strictly as per the terms and conditions under which the registration was granted to the appellant for the manufacture of tractors. To come to this conclusion, the Additional Collector relied on the reply telegram received by the Customs Authorities from the Director of Industries, Haryana dated 29-6-1984. Secondly he held that the provisional registration granted to the appellant had expired before clearance of the consignment from Customs House. Thirdly, he held that the power pack are complete except in respect of minor parts, such as, filter, muffler, shield and clip. The engines are imported in SKD condition and they still fall within the scope of Serial No. 470 of Appendix 3 of Import Policy of A.M. 84. Fourthly he held that the items like front axle, stearing assembly rear rim with tyres and tubes cannot be imported as they were included in the banned list Appendix 3.

18. Having regard to his above findings, and since the goods were already released to the appellant on ITC Bond he directed the Bond be enforced for a sum of Rs. 10 lakhs towards fine in lieu of confiscation for the goods covered by Bill of Entry 2783/25. He further ordered confiscation of the goods covered by Bill of Entry No. 2783/24 but allowed redemption on payment of fine of Rs. 10 lakhs.

19. On behalf of the appellants, Shri J.R. Gagrat, their learned Advocate contended that the registration certificate was valid to cover the goods imported. There was valid registration for the manufacture of tractor, at the time the appellants opened L/C and at the time of shipment, and, therefore, Customs authorities cannot object to the import on the ground that there was violation of condition 21(a) of Appendix 10. It was urged by Shri Gagrat that at the time of obtaining the registration, the appellants have submitted that their programme was a phased programme, and their was no representation that the components would not be imported during the first phase. Shri Gagrat has further contended that the goods imported are not complete tractors but only components and the components imported covers 70% of the tractor and 30% are indigenously manufactured. In support of his contention that the goods imported are components of tractors, Shri Gagrat relied upon the letter of the suppliers dated 16th July. Shri Gagrat further contended that none of the components fall under Appendices 3, 4 or 5, because they are all components of tractors and Director General of Technical Development had issued clarification that the components imported are permissible items under OGL Appendix 10(1) and they fall within the ambit of Item 89 of list 8 of Appendix 10.

Shri Gagrat had urged that the clarification given by D.G.T.D is binding on the Customs. Shri Gagrat also contended that for the purposes of levying customs duty, Bills of Entry were assessed as components of tractors and therefore it is not open to the Customs to contend that what had been imported are tractors in CKD condition.

20. Shri Pal, appearing for the Respondent Collector, supported the order passed by the Additional Collector and contended that the importers did not comply with the requirement of para 21(a) of Appendix 10 of the ITC Policy and they had no manufacturing programme for assembling of tractors. He also urged that import under Appendix 10(1) is subject to restrictions contained in appendices 3 to 5 and the item Power packs fall under Serial No. 470 of Appendix 3; front axle wheel would come under Serial No. 413 of Appendix 5, Hydraulic Steering Assembly and Hydraulic Control Assembly would come under Serial No.432(17) of Appendix 3 and rear rims with tyres and tubes would fall under Serial No. 351 of Appendix 3 and therefore, those items cannot be imported under OGL. Shri Pal had further contended that the appellants had imported tractor and not components of tractor and therefore import under OGL 10(1) had been rightly held to be impermissible.

21. Having regard to the rival contentions, the points that fall for determination are : (1) Whether the registration certificate granted to the appellants was valid to cover the imported goods.

(2) Whether the Customs authorities are competent to go into the validity of the registration certificate; (3) Whether the goods imported are complete tractors or only components of tractors; (4) Whether power packs, front axle, wheel assembly, Hydraulic control assembly, Hydraulic steering assembly and rear rim with tyres and tubes could not be imported under Appendix 10(1).

22. Points 1 & 2: As these two points are inter-related they are taken up together for consideration. In arriving at his conclusion that the import under the OGL was in contravention of the condition stipulated under para 21(a) of Appendix 10, the Additional Collector had taken the following factors into account: (a) That the registration certificate granted to the appellant was a provisional certificate valid for a period of one year; (c) In the application for registration, of additional item 'tractor' the appellant had not disclosed that they will be using imported components in the manufacture of tractor; (d) The appellant represented that the assembly of tractor would be primarily of indigenous components; (f) The import required a clearance from Ministry of Industries due to foreign collaboration of the importers; and (g) That the registration granted to the appellant had expired before the clearance of the consignment in one case and in another the imported goods as still in the Customs Warehouse.

23. On behalf of the appellant, it was urged that there was a valid registration certificate for the manufacture of tractor not only at the time the appellant opened a Letter of Credit and at the time of shipment but also when they sought clearance and in the said circumstances the Additional Collector's findings, that the registration granted to the appellant expired before the clearance of the consignment, is factually incorrect. There appears considerable force in this contention. The registration certificate is dated 15-4-1980 vide Exhibit 'C', page 54 of the paper book. The item "tractor" was added on 6-7-1983 on a provisional basis for a period of one year. The opening of the L/Cs and amendment to the L/Cs took place on or before 24-8-1983. The shipments, as could be seen from the various Bills of Lading, were also prior to the expiry of the period prescribed in the provisional registration certificate, namely, on 13-2-1984. The two Bills of Entry are dated 12-3-1984 and 19-4-1984 respectively. The clearances was sought under OGL under Appendix 10(1).

Para 21(a) of Appendix 10, requires the Actual Users of the imported goods to furnish to the Customs authority a declaration contemplated in that paragraph at the time of clearance. Admittedly, the appellant had given such a declaration. The particulars required to be incorporated in the declaration are : (1) their industrial licence or registration as an Actual User with the concerned authorities, namely, the number and date of the industrial licence/registration and the end-product(s) of manufacture, and affirming that (i) the Industrial Licence/registration has not been cancelled or withdrawn or otherwise made inoperative and (ii) the items imported under OGL are strictly in accordance with the terms and conditions of their Industrial Licence/registration with the sponsoring authority concerned as an Industrial Unit and their approved phased manufacturing programme. In case no phased manufacturing programme has been approved for them, they should say so in the declaration, and (iii) Actual Users (Industrial) are also required to furnish at the time of clearance of goods a certified copy of the phased manufacturing programme; if any, approved for them by the sponsoring authority or other concerned authority.

24. In the whole of his order, the Additional Collector did not state that the appellant did not produce the declaration contemplated by para 21(a) or that the declaration contained therein did not satisfy the requirement of para 21(a). The findings of the Additional Collector is found at para 5 of his order. The Additional Collector has referred to the copy of the letter written by the importer to the Director of Industries, (General Manager), Industrial Development Centre, Faridabad seeking the provisional registration for the manufacture of tractors.

The Department sought the clarification in this regard from the Director of Industries, Haryana who was the registration body for the importing firm. Reply was received and a copy was made available to the importers on 11-1-1985. From the telegraphic replies, it was understood that assembly of tractors was based primarily on indigenous components.

Import was not recommended. The Additional Collector further observes in his order "subsequently the Custom House further addressed a telegram to the Director of Industries, Haryana on 22-12-1984 seeking confirmation if provisional registration was extended beyond 5-7-1984.

No reply had been received." 25. The appellant had annexed the copy of the letter dated 31-3-1983 made to the General Manager, District Industries Center, Faridabad (vide Exhibit 'A' pages 39 to 44 of the paper book). The appellant had also produced a letter dated 1-7-1983 addressed to the General Manager, District Industries Center along with the appellant's organisational structure, technical plan and other information on tractor project (vide Exhibit 'B' pages 45 to 53 of the paper book). In their letter dated 31-3-1983 while referring to their manufacturing activity they stated that they had decided to expand and diversify their activities.

Therefore they requested the District Manager to add the following words to the original certificate "ITEM ADDED TRACTORS AND PADDY PLANTERS". In this letter, among other things, the appellants stated that with their rich experience, technical staff, professional management, machineries and adequate ancillary facilities available in Faridabad, they will be able to easily manufacture the tractors and paddy planters. According to the appellants, they had enclosed to this letter the list of plant and machinery installed vide pages 41 & 42 of the paper book; technology of tractors and paddy transplanters vide pages 43 & 44. In this enclosure, the appellant stated among other things that they propose to start Espi tractors with the addition of 30% as per stipulation of DCSSI, Government of India and reach 50% by the end of first years production. After 50% they will achieve 100% indigenous contents only in three years time. The phased manufacturing programme will be submitted soon after they receive the certificate.

During first year they propose to import components at 70% from 1000 Nos. of tractors. Shri Pal, appearing for the Collector, submitted that the appellant did not produce this document along with their letter dated 31-3-1983. In the order of the Additional Collector, though there is a reference that the appellant was called upon to make available a copy of the application made to the sponsoring authority and that the appellant had furnished a copy of and that the copy furnished did not contain the documents just referred to above. Shri Gagrat, however, urged that before the grant of provisional registration another letter dated 1-7-1983 was delivered to the General Manager, District Industries Center the copy of which is Exhibit 'B'. In this letter, the appellant had enclosed various information as to their tractor project, their organisational structure, technical plan, their standard manufacturers ancillary industries, vendors etc. Further in this letter, it was made clear that they had received a communication from M/s. Traktoroexport that they must visit them immediately to sign various agreements, the copies of which were enclosed. Shri Gagrat then referred to the letter dated 25-6-1983 received from Traktoroexport. It was to the effect that Traktoroexport, Moscow would like to meet the appellant in Moscow on 4-7-1983 to start negotiation and finalise the following : Further they had desired opening Letter of Credit for above Rs. 10 million for delivery of 250 sets of UMZ-6AM tractor component before appellant's departure. Shri Gagrat then referred to the "Technical Plan" vide enclosure B (page 50 of the paper book enclosed) to the letter dated 1-7-1983. On the basis of the above documents, Shri Gagrat contended that before the General Manager, District and Industrial Center made the endorsement regarding tractor he was made known that components would be imported by supplying the copy of the letter dated 25-6-1983 received from M/s. Traktoroexport, Moscow. Shri Gagrat further contended that the Additional Collector committed an error in holding that the appellant made any representation to the Director of Industries that the appellant was to assemble tractors based primarily on indegerious components and as such there was a breach of condition Contained in para 21(a) of Appendix 10. Shri Pal, appearing for the Collector, however, urged the annexure, Exhibit B to the letter dated 1-7-1983 clearly gives an impression that there was no proposal to import components and the components were to be obtained indigenously.

Shri Pal submitted that in the enclosure B to the letter dated 1-7-1983, the appellant has clearly stated that in and around Faridabad, a large number of fully equipped ancillary equipment is already in existence catering to the needs of the tractor industry which includes Ford tractors (ESCORTS), Zetor tractors (HMT), Ursus tractors (ESCORTS) and EICHER tractors. Further it was stated that most of the components are either available or the technology was available with the ancillary industry who are every ready to manufacture the components to meet specific needs i.e. to manufactures specifications.

Shri Pal also referred to the statement contained in this enclosure to the effect that the appellant is installing a fully automatic paint shop and surface treatment plant. The surface treatment could be carried out on all the components before assembly. Shri Pal contended that if the components were to be imported; there was no need to mention in the enclosure (Exhibit B) the particulars referred to above.

It was also contended by Shri Pal that the enclosure 'C' to the letter dated 1-7-1983 the list of associates are also given which again support the Department's contention that at the time of applying for registration the registering authority was made to understand that components would not be imported and indigenously manufactured components would be made use of.

26. The above documents or other documents in the file do not establish in clear terms that there was positive representation on the part of the appellant that no components would be imported. In the first application dated 31-3-1983 there is no mention as to whether components would be imported or they are indigenously available. For the appellant, it was contended that technology and tractor in paddy transplanters were enclosed to the letter dated 31-3-1983 and in this there was a clear statement that they propose to manufacture tractor with the deletion of 30% in the first year and 50% by the end of the first year but as stated earlier, Shri Pal has contended that this document was not enclosed to the application. Here again there is no acceptable evidence as to the inclusion or non-inclusion of this enclosure to the letter dated 31-3-1983. The Additional Collector had relied on a telegraphic reply received from the Director. The authority which granted the provisional certificate is the General Manager, District Industries Center and not the Director of Industries, Haryana.

The appellant is admittedly a small scale industry. The factory of the appellant is situated at Faridabad. As per the Handbook of Import-Export Procedures 1983-84, General Managers of District Industries Center have also been designated sponsoring authorities of concerned Units in the small scale and cottage sectors. It was the General Manager of the District Industries Center which granted the provisional certificate adding tractor as one of the manufacturing items in the certificate of registration. The General Manager did not artach any condition. The certificate did not state that import of components are not permitted. In the absence of such a condition the import cannot be objected to by the Customs authorities on the ground that at the time of making an application for registration there was a representation that no components would be imported. It is not within the province of the Customs authority either to investigate or enquire into as to how and in what manner the appellant obtained the registration certificate. There was a registration certificate by a competent authority for the manufacture of tractors and that certificate was valid upto 6-7-1984. The declaration required vide para 21(a) of Appendix 10 was admittedly made by the appellant at the time of clearance. Even assuming that there was mis-representation or suppression of facts by the appellant at the time of making the application even then the registration certificate would not on that account become invalid. The principles laid down by the Supreme Court in East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta, 1983 ELT page 1342 (SC) would apply. In that case it was contended that the licence was obtained by mis-representation and therefore it was invalid the Supreme Court rejected this contention by observing "Nor is there any legal basis of the contention that the licence obtained by mis-representation makes the licence conset, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued Under Section 3 of the Act so as to bring the goods within Clause 8 of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract applied to the issue of a licence under the Act, a licence obtained by fraud is only avoidable; it is good until avoided in the manner prescribed by law". As has been stated earlier the competent authority had added tractors in the registration certificate and granted provisional registration certificate which was to be valid for a period of one year from 6-7-1983. When an importer seeks clearance of the imported goods under OGL under Appendix 10(1) the Customs authority is not required to investigate nor can it investigate as to how and in what manner the importer obtained the registration certificate. All that they have to be satisfied is whether there was a registration certificate for the manufacturing activity; whether that certificate was issued by a competent authority and whether the importer had made the declaration required to be made under para 21(a). In the instant case, at the time of clearance there was a valid registration certificate; the said certificate did not contain any condition debarring the import of components for the manufacturing activity. It was issued by a competent authority, namely, the authority contemplated in the Hand Book of Procedure. Even according to the allegations in the show cause notice, there was no approved phased manufacturing programme. In the said circumstances, the appellant was not required to furnish a certificate of the phased manufacturing programme at the time of clearance. The finding of the Additional Collector that the appellant violated the terms of para 21(a) is not well-founded.

It is true that the registration granted for the tractor was provisional and was for a period of one year. It is also true that at the time of passing the adjudication order there was no proof as to whether the period was extended or not. But then the relevant date for the purpose of Customs clearance is the date of shipment and could be the date on which the appellant sought to clear the goods. The provisional registration was valid from 6-7-1983 to 5-7-1984. The shipment took place on 13-2-1984. The Bills of Entry were filed on 12-3-1984 and 19-4-1984 well within the validity of the registration certificate. It is thus seen that at the time of importation as well as at the time of clearance there was a valid certificate of registration issued by a competent authority and as such there could be no objection for the release of the consignments. The extension or otherwise of the validity period of the registration certificate is immaterial; so far as the release of the goods by goods by Customs is concerned. The appellant takes a risk if its provisional certificate was not extended.

What should happen to the imported goods subsequent to import is not the concern of the Customs at the time of clearance of the goods. If the imported goods are not utilised for the purpose for which they are imported it may amount to contravention of the condition of the licence or restriction placed on the importer. This violation, if at all, may give rise to a separate cause of action but the Customs authority on the ground that the appellant may not be able to use the imported goods for the rise to a separate cause of action but the Customs authority on the ground that the appellant may not be able to use the imported goods for the manufacture of tractor, cannot refuse to release the goods if on the date the appellant sought clearance there was a valid registration for the manufacture of tractors. Therefore, the Additional Collector was not justified in holding that the import was banned because the registration certificate granted to the appellant was a provisional certificate or that the period was not subsequently extended.

27. One other ground on which the import was held to be bad was the registration granted to the appellant had expired before the clearance of the consignment in one case and in another the imported goods were still in the Customs House. The clearance was delayed for no fault of the appellant. Immediately after the vessel entered the Bombay Port, the appellant had filed Bills of Entry for clearance. The declaration contemplated by paragraph 21 (a) of Appendix 10 is required to be filed at the time of clearance of the goods. The expression "at the time of clearance" appearing in paragraph 21(a) of Appendix 10 means the date on which the Bill of Entry is filed for clearance. Section 46 of the Customs Act require an importer of any goods to make an entry thereof by presenting to the Proper Officer a Bill of Entry for home consumption or warehousing in the prescribed form. Sub-section (3) of this Section enables presentation of Bill of Entry at any time after delivery of the import manifest or import report. The proviso to that Sub-section authorise the Collector to permit presentation of B/E even before the delivery of the import manifest. Section 47 requires the Proper Officer to make an order permitting clearance of goods for home Consumption on being satisfied that the goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, etc. thereon and any other charges payable under the Act in respect of the said goods. Section 48 authorises the Proper Officer to sell the imported goods if they are not cleared for home consumption or warehoused or transhipped within the two months from the date of the unloading of the goods. Having regard to the above provisions the expression "at the time of clearance" could only mean the date on which the clearance was sought by the party by presenting a Bill of Entry. The expression "at the time of clearance" appearing in para 21 (a) of Appendix 10 cannot be interpretted to mean the date on which the actual physical clearance of the goods takes place. Such an interpretation would defeat the scheme of the Act. In the instant case, the Bills of Entry in respect of the two consignments were filed within the validity period of the provisional registration. Therefore, the view taken by the Additional Collector, that the registration granted to the appellant had expired before the clearance of the consignments, is erroneous.

28. The only other ground on which the import was held to be bad was that the import required a clearance from the Ministry of Industry, due to the foreign collaboration of the importers. No incidence has been adduced by the Department to establish that there was a foreign collaboration. The appellant has entered into an agreement with the Traktoroexport, Moscow for the import of components of tractors. The appellant has produced a copy of the contract entered into with the Traktoroexport, Moscow. In the show cause notice it was alleged : "It is also a condition that the firm will have to apply to the Government of India, Ministry of Industries, for import of designs and drawings notwithstanding the facts that no, payments are involved either in the form of lump sum or royalty as this involves technical collaboration. The importer has not furnished any such clearance from Government of India on this regard." In the show cause notice it was not stated that under what provision of law such a clearance from the Government of India was required. The Additional Collector did not record a finding that there was foreign collaboration or that the clearance from the Ministry of Industries is a condition precedent for ordering clearance. Further, the production of clearance of the Ministry of Industries is not one of the stipulation in para 21(a) of Appendix 10 of the Policy.

29. Admittedly the clearance was sought under Appendix 10(1). On the date when the appellant sought clearance there was a valid registration certificate for the manufacture of tractor. The appellant was a small scale industry and not a unit registered with the DGTD. The only obligation cast on the Customs authority before granting clearance was to obtain a declaration from the appellant giving particulars of registration such as the number and date and the end-product or products of manufacture and affirming that the registration has not been cancelled or withdrawn or otherwise made inoperative. Further the declaration should also contain a statement that the items imported under OGL are strictly in accordance with the terms and conditions of their registration with the sponsoring authority. As has been stated earlier, such a declaration had been furnished by the appellant. On the date of declaration they held a valid registration and it has not been cancelled or withdrawn or made otherwise inoperative. Para 21(a) did not require the Customs authority to make any other enquiry or authorise the Customs authority to impose any other condition before clearance of the imported goods. Thus all the factors which were taken into consideration by the Additional Collector to hold that the import was not valid are not at all relevant and they are untenable.

30. The next ground on which the import was held invalid was that what had been imported is not components of tractors but the tractors in CKD condition. In the show cause notice it was alleged that the item of tractors fall under the category of Capital Goods and as such they need the Capital Goods Import Licence for their importation and no such capital goods Import Licence had been produced for the clearance through Customs. The further allegation in the show cause notice was that the appellant appeared to have made a mis-declaration that the imported goods are components of tractors with a view to get them accommodated within the scope of OGL, Appendix 10 Serial No. 1. The Additional Collector did not, however, record a specific finding that what had been imported are complete tractors and not components of tractors.

31. During the hearing of the appeal, Shri Pal, appearing for the Collector, had urged that what had been imported are tractors and not components and therefore the import is impermissible under Appendix 10(1) which permits import of components only by an Actual User (Industrial). In support of his contention, Shri Pal relied on para 244 of the Import Policy, Volume I of A.M. 84 and also on the quality certificate furnished by the importers as well as on the Bill of Lading and packing list. Shri Gagrat, on the other hand, contended that what had been imported are only components and not tractors in CKD condition. Shri Gagrat urged that before importing, the appellant had sought clarification from the DGTD and the DGTD had clarified that they are the components falling under 10(1) and the clarification given by the DGTD was binding on the Customs authority. He also urged that resort to para 244 of the Policy is impermissible in view of para 242.

Shri Gagrat also urged that all the documents, namely, the contract entered into by the importer with Trakotoro-exports, Moscow, the letters of indents, Bill of Lading, invoice, packing list indicate that what had been imported are components of tractors and not tractors.

Shri Gagrat also contended that in the show cause notice it was wrongly alleged that number of components which have not been imported were only six. In fact, nearly 135 items were not imported. The whole electrical system was not at all imported and therefore it cannot be said that what had been imported was tractors in CKD condition. Shri Gagrat urged that according to the contract entered into 30% of the components are not to be imported. He further urged even the manufacturers have subsequently clarified as to the goods imported. As an alternative, Shri Gagrat contended that even if the imports are considered as tractors in CKD condition, the imports cannot be objected to because the appellant being Actual User (Industrial) is entitled to import all the components of the tractor. Appendix 10(1) did not prohibit import of all the components of a tractor and there was no other entry which prohibited import of all the parts of components of the tractors. Shri Gagrat further contended that the Bills of Entry were finalised and they were assessed as individual components and therefore it is not open to the Department to blow hot and cold simultaneously. It was also urged to Shri Gagrat that neither the components imported nor the tractor as an end-product would fall within the definition "Capital Goods". Shri Gagrat relied on the decision of the Supreme Court reported in AIR 1971 Supreme Court page 1558 - Tarachand Gupta and Brothers v. Union of India in support of his contention that the Customs cannot object to the import solely on the ground that the parts imported if assembled would be a complete tractor and therefore impermissible for import. Let me in the first instance examine the Department's contention that what had been imported are tractors in CKD condition. Exhibit 'E' (page 71 of the paper book) is a copy of the contract dated 29-7-1983 entered into by the appellant with Traktoroexport, Moscow. The contract was to import 1000 sets of components of agricultural tractors UMZ-6AM with Power Pack Components of engine D-65M and Rear Wheels 15 x 30" components and units. In this contract, it was further stipulated enclosure No. (1) will not be delivered. The enclosure No. (1) consists of 135 items value of each item or all the items put together was however not given. The contention of the appellant that the entire electrical system was not to be imported had not been controverted. Thus it is seen that all the components are not to be imported as per the agreement. Further, the agreement was specific namely, 1000 sets of components of agricultural tractors to be delivered. The packing specification is mentioned in the agreement and that specification reads "3 sets of tractors components in one container". In the L/C the description of the goods is given as components of Belarus tractor UMZ-6AM. In the Bills of Lading against the heading kind of packages and description of goods, it was written containers components of Belarus tractor UMZ-6AM. In the Bs-E the description given was 'Components of Belarus tractors UMZ-6AM." In the invoice against the heading description of goods, it was stated components of Belarus tractor UMZ-6AM, as per list attached for 50 sets. Import under OGL as Actual Users (Industrial) and covered by entry No. 89 of part 1 list 8 Appendix 10(1) 1983-84 L.P. Thus it is seen that in all the documents the description of the goods given was components of tractors and not tractors. The Department, however, relied upon the description given in the factory packing list No. 45 to the effect that 'tractor disassembled version'. The Department also relied upon factory packing list No. 11 where the description given was "UNITISED". It lastly relied upon the factory quality certificate No.42 where it was written "tractor units are produced as the tropical version and are preserved for a period of one year. Now it is seen in the packing list No. 45 the description was tractor in disassembled version. In packing list No. 11, the expression used was unitised assembly. The appellant sought clarification from the foreign suppliers with regard to the expression used in those two documents. The reply dated 16-7-1984 from the supplier is found at page 170 to 172.

Regarding factory packing list No. 45 the suppliers explained components of tractors never a complete tractor. They have further written that as many as 134 parts valued at Rs, 30.06% cost of a total tractor are made in India. They clarified that to say that they had exported a complete tractor in dis-assembled condition is totally wrong. As regards factory packing list No. 11, the suppliers stated that their factory has used a word which is not English. By 'unitised assembly' actually mean components in unit. Further it also means that engine components, have been packed unitwise. As regards the factory quality certificate No. 42, the suppliers stated that the factory produces various models of tractors and tropicalised version is one type. Components for these for export have been preserved with chemicals.... The word "preservation" is used always for components and parts and never for tractors. In this letter, the suppliers also clarified that the following engine parts are made in India and without which no engine is complete; (1) filter, (2) muffler, (3) shield, (4) clip. Having regard to the clarification of the suppliers regarding documents relied upon by the Department; and having regard to the contract that was entered into and the descriptions contained in the letters of indent, invoice, Bills of Lading, packing list and the list of components not to be imported, it could be safely held that what were imported are not tractors in CKD condition. In this connection, reference may be usefully made to the decision of the Supreme Court referred to earlier, namely, Union of India v. Tarachand Gupta and Brothers. The Supreme Court was considering the entries 294 and 295 of Section II of part IV of Schedule I of the Import Trade (Control) Policy for the period July-December, 1956. Entry 294 dealt with import of motor cycles and scooters. In the remarks column it was laid down that licence granted under this item will not be valid for the import of motor cycles or scooters in a completely knocked down condition.

Entry 295 dealt with articles (other than rubber tyres and tubes) adapted for use as parts and accessories of motor cycles and motor scooters except such articles as are adapted for use as parts and accessories of. motor cars. The words "completely knocked down condition" was interpretted by the Supreme Court as to mean "made or constructed so as to be capable of being knocked down or taken apart as for transportation; in parts ready to be assembled". The Supreme Court interpretted entry 295 and held that there are no limitation as to the number of kind of parts or accessories which can be imported under the licence obtained in respect of the goods covered there under. Supreme Court observed "prima-facie, an importer could import all the parts and accessories of motor cycles and scooter 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 assembled, would make motor cycle and scooters in CKD condition.

There are no remarks against entry 295 as there are again entry 294, that a licence in respect of the goods covered under 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 saddles so that it was impossible to say that they constituted motor cycles and scooters in CKD condition". Appendix 10(1) did not prohibit import of all the components of a tractor. In the absence of any restrictions regarding import of all the components of a tractor it would not be open to the Customs to take objection to the import of the components on the ground when the components so imported assembled together would make them tractors. In the above case, the Supreme Court observed what the Collector had to ascertain was 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 CKD condition. The Supreme Court held if the Collector were to adopt such an approach he would be acting contrary to and beyond entry 295, under which he had to find out whether the goods imported were of the description in that entry. Such an approach would be in non-compliance of entry 295. It was further observed by the Supreme Court that the only question, therefore, before the Collector was whether the respondents licence covered the goods imported by them i.e., whether the goods were parts and accessories. If they were, the imports were legitimate and no question of their being not covered by the licence or the respondents having committed breach of Section 3 of the Imports and Exports (Control) Act or Section 167(8) of the Sea Customs Act would possibly arise. What the Collector, however, did was that he put the two consignments together and held that they made up 51 'Rixe' Mopeds in CKD condition and were, for that reason, not the articles covered by Entry 295, but articles prohibited under remark (ii) of entry 294. Supreme Court observed remarks (ii) containing that prohibition had nothing to do with entry 295 which did not contain any limitations or restrictions whatsoever against imports of parts and accessories. That being so, if an importer has imported parts and accessories, his import would be of the articles covered by entry 295.

The Collector could not say, if they were so covered by entry 295, that when lumped together, they would constitute other articles, namely, motor cycles and scooters in CKD condition. Such a process, if adopted by the Collector, would mean that he was inserting entry No. 295 a restriction which was not there. That obviously he had no power to do.

Such a restriction would mean that though under a licence in respect of goods covered by entry 295 an importer could import parts and accessories of all kinds and types, he shall not import all of them but only some, so that when put together they would not make them motor cycles and scooters in CKD condition. In the present case, even that was not so because he would have to buy tyres, tubes and saddles to convert them into motor cycles and scooters into CKD condition they would be tantamount to the Collector making a new entry in place of Entry 295 which must mean non-compliance of the entry and acting in excess of jurisdiction during the course of his enquiry eventhough he had embarked of an enquiry with jurisdiction." 32. The above Supreme Court decision is a complete answer to the contentions urged by the Department that in -the guise of importing components the appellant has imported tractors in CKD condition.

33. It may be stated here that for the purpose of assessing Customs duty the Department has assessed them as components. There is considerable force in the contention of Shri Gagrat that the Department cannot blow hot and cold simultaneously. At one breath they cannot contend that what was imported was tractors and at another breath that they are not tractors but components and therefore liable to be assessed as components. Shri Pal, however, submitted that the assessment was provisional. Whether provisional or final the fact remains that they were assessed as parts and not complete machines.

34. The Department had relied upon para 244 of the Policy A.M. 1984.

The said para reads: "Save as above, the rules for interpretation of the first Schedule in the Customs, Tariff Act, 1975 (51 of 1975) contained therein will apply to the clearance of consignments, imported under this policy". It was urged for the Department that as per the provisions contained in Customs Tariff Act Interpretation Rule 2(A) of the Rules for Interpretation of the Schedule and the clarification contained in Customs Tariff Nomenclature Explanatory Notes for incomplete machines and unassembled machines they will be assessed to duty as per the essential character of the machines. The goods under import have the essential character of the tractor only items, such as, batteries, electrical wiring are missing parts and therefore the essential character of the components under import is tractor and not components of a tractor and as such they cannot be imported under OGL.

Para 244 begins with the word "Save as above". Shri Gagrat appearing for the appellant submitted that resort to the first schedule in the Customs Tariff Act can be made only in respect of matters which are not covered by the paragraphs which preceded para 244. He urged the para that is relevant for the interpretation is para 242 and not para 244.

There is considerable force in this contention. Para 244 begins with the words "Save as above". Thus it is clear if the other paragraphs are applicable then resort cannot be had to para 244. Chapter 22 of the Policy deals with clarification and interpretation of the policy. Para 242(3) reads "In respect of items other than iron and steel, an Actual User i.e. any person desirous of importing an item subject to A.U.condition, may seek clarification from the DGTD (Import and Export Control Cell), Udyog Bhavan, New Delhi - 110011 about :- (i) the scope of any item in appendices 1, 2, 3, 4, 5, 8, 9, 10, 15 and 30; (iii) any doubt whether any particular item required by him is a raw material, component, consumables, spare or capital goods or a consumer item banned for import." requires the Actual User to seek clarification in the proforma given in the Appendix 28. Note A reads': "The DGTD will liaise with other Ministries concerned and provide the necessary clarification to the Actual Users. It is thus seen that DGTD had been constituted as an authority to clarify the scope of any item in Apendices 1 to 5, 8 to 10, 15 and 30. The appellant, in the instant case, did seek clarification from the DGTD by their letter dated 5th October 83 vide exhibit H page 98. Exhibit 'I' is the letter dated 7th October, 1983 addressed to the appellant by the DGTD (vide page 100 paper book). The DGTD had clarified that in terms of the Policy 1983-84 the items mentioned require as components in the manufacture of Belarus UMZ-6AM tractors will be covered by Entry No. 89 of Part I of list 8 of Appendix 10 of the Import and Export Policy 1983-84 subject to the condition laid down in the said Policy. In a case reported in 1982 ELT- page 171 Bombay Chemicals v Union of India and 14 others, His Lordship Justice Pendse observed : "The Customs authorities were bound to accept the certificate issued by the DGTD and it is not permissible to go behind it merely because the Customs authorities feel that the contents of the certificate were disproved by some other material. There is a great danger in accepting the submission of the Department that the authorities can brush aside the certificate and determine whether the assessee is entitled to exemption or not. In case this principle is accepted then it would open the floodgates of falls and frivolous claim by the assessees who have been denied the certificate by the Director General by claiming that the Director General has ignored certain facts and the Customs authorities should independently consider whether the requirements or the conditions of the Notification are complied with. Surely that could not have been the intention of the Government of India and it is clear that the Government desired that the exemption should be granted once the conditions of the Notification including the condition of certificate from the Directorate General are complied with." 35. The ratio of the above decision would apply to the facts of the present case. Under the Policy the DGTD was constituted as the authority to clarify the scope of any item appearing in appendices 1 to 5, 8 to 10, 15 and 30. The DGTD had clarified that the imported items would be components falling under item 89 of list 8 of Appendix 10.

That clarification should be respected by the Customs. In any case, having regard to the wording of para 244 it is not open to the Customs authorities to resort to Customs Tariff Act for the purposes of classification. For the foregoing reasons, I reject the Department's contention that what was imported were tractors and not Components of tractors.

36. In the show cause notice it was alleged that the following items cannot be imported under OGL Appendix 10(1) inasmuch as they fall within Appendix 3 which are not permissible under import as OGL items according to Appendix 10(1) of the Policy AM 84. Item (1) Power pack in CKD condition, (2) Front Axle with half frame assembly, (3) Stearing assembly, (4) Clutch assembly, draft control hydraulic control assembly, (5) Rear rims with tyres and tubes. The finding of the Additional Collector reads "AS regards the power pack, these items are complete except very minor parts such as filter, muffler shield and clip. This has been certified by the supplier firm also. The Horse Power for this engine is 65 H.P. They are imported in CKD condition of the engines and they will fall within the scope of Serial No. 470 of Appendix 3 of Import Policy of AM 84. The Additional Collector did not record and specific finding regarding other four items set out above.

During the hearing, Shri Pal, appearing for Collector contended that the item Front Axle with half frame assembly is covered by item 413 of Appendix 5 as industrial gear boxes. Likewise the items transitional assembly with differential clutch control break, rear axle, housing etc. are also covered by item 413 of Appendix 5. Shri Pal further urged stearing assembly with draft control are hydraulic control assembly and are covered by item 432 (17) of Appendix 3. It was also contended by Shri Pal the rear rims with the tyres and tubes fall under item 351 of Appendix 3 since tyres and tubes are made of rubber. Shri Pal urged that the items appearing in Appendix 3 as well as Appendix 5 cannot be imported under Appendix 10(1) as OGL items.

37. Shri Gagrat appearing for the appellant however contended that before clearance of the imported items the appellant had sought clarification in respect of each and every item from the DGTD which was the authority constituted to clarify as to the scope of any items falling under Appendix 10 and that authority had clarified in uncertain terms that all the items fell under Serial No. 89 of List 8 of Appendix 10 and they could be imported as components of tractors under OGL and therefore the objection raised by the Customs was untenable, Shri Gagrat further contended that what had been imported as components of tractors. Further even according to the Department, it is components of the power pack that were imported and not the engine in assembled condition and therefore there is no scope to contend that the power pack falls within the ambit of item 470 of Appendix 3. Shri Gagrat urged that the Department is acting in a self contradicting manner inasmuch as while on the one hand it wants to invoke the Rules for the interpretation of the Customs Tariff for decinding the Import Trade Control issue and for holding that what has been imported are complete tractors on the other hand it wants to assess what has been imported as individual component in the relevant Bills of Entry. The allegation of the Department that tractor is an item of Capital Goods is also entirely wrong in the context of the manufacturing activity of the firm. In support of his contention, Shri Gagrat referred to the definition of the Capital Goods found in para 58 of the Import Policy A.M. 84 and contended that neither the components imported or the end-product tractor could fall within the definition of Capital Goods and therefore the contention of the Department that the component imported are complete units is erroneous.

As regards the front axle with half frame assembly and transmission assembly with the differential clutch, control brake, rear axle housing etc., Shri Gagrat urged that Serial No. 413 of Appendix 5 of the Import Policy covers the industrial and marine gears and gear boxes (other than for automotive applications). It was urged that the item of front axle with half frame assembly does not comprise gears or gear boxes. It was also urged that tractor is neither an item of industrial machinery nor is it a marine vessel. Shri Gagrat contended that tractor is an automotive which aspect is clear from para 146 of the Policy AM 84 wherein it is included in the category of motor vehicles. Further, in Schedule I appended to the Import (Control) Order, 1955 it had been included in the Chapter 87 relating to vehicles and not in the Chapter relating to machinery. Therefore, Shri Gagrat urged the contention of the Department that the front axle with half frame assembly and transmission assembled with different clutch control brake, rear axle, housing etc. fall within item 413 of Appendix 5 is wholly incorrect.

38. As regards the stearing assembly and draft control, Shri Gagrat contended that Serial No. 432 (17) of Appendix 3 of AM 84 covers hydraulic control assembly of industrial machinery. For automotive components there is a separate Serial No. 433. In the said Appendix and in Serial No. 433 hydraulic control assembly had not been mentioned as one of the items. Therefore, the Department's contention that the stearing assembly and draft control falls within the ambit of item 17 of item 32 of AM 84 is wholly incorrect.

39. As regards tyres and tubes, the contention of Shri Gagrat was that the tyres and tubes for tractors would not fall within Serial No. 351 of Appendix 3 inasmuch as the tractors are automotive and Serial No.353 specifically excludes tyres and tubes for automotive application.

40. In order to appreciate the rival contentions it would be necessary to refer to the relevant provisions of the Policy A.M. .1984. Appendix 10(1) authorises Actual Users (Industrial) to import raw materials, components and consumables other than iron and steel items and other than those included in the Appendices 3, 4, 5, 8, 9 & 15. In other words, if the raw materials, components and consumables appear in appendices 3, 4, 5, 8, 9 & 15 then those items cannot be imported under OGL by the Actual User (Industrial). The conditions governing import under OGL are set out in paragraphs 1 to 42 of Appendix 10. Para 20 allows import of raw materials, components, consumables by Actual Users (Industrial) against firm orders for which irrevocable letter of credits are opened and established on or before 29-2-1984 and the shipment is allowed upto 30-6-1984. Para 21(a) requires the Actual User (Industrial) to furnish to the Customs Authority a declaration giving particulars of their industrial licence or registration and other particulars as are set out in that paragraph. In respect of units registered with DGTD, Actual Users (Industrial) are required to furnish a list of components duly attested by DGTD. The items of raw materials components and consumables allowed under OGL are enumerated in list 8 of Appendix 10. Item 89 of list 8 reads : "All components, of machines tools, machinery, equipment, instruments and other engineering item (including consumable durables) covered under OGL excluding electronic components".

41. The expression "Capital Goods" is defined in paragraph,5(8) of Chapter 2. 'Capital Goods' means any plant machineries, equipment, or accessories required by an investor for production of goods or for rendering services including those required for replacement or expansion.

Appendix 3 contains list of limited components, consumables tools and spares (other than iron, steel and ferro alloys). Item 432 of Appendix 3 sets out assemblies and sub-assembles. Sub-item 8 of 432 reads "complete engines including expansion engines. Item 17 reads "Hydraulic control assembly".

The automotive components are set out in item 433 of Appendix 3 sub-item 5 reads 'Filter/cleaner assembly, or lubricating oil. Sub-item 10 reads "Silencers or muffler and pipes and extensions thereon. Item 351 of Appendix 3 reads "Rubber products inclusive of products from natural or synthetic rubber and accessories excluding the following : Oil seals, bushings, 'O' rings and tyres/tubes (including clips in equal numbers) for automotive applications.

Appendix 5 deals with list of automatic permissible items of raw materials components consumables tools and spares (other than iron and steel and fello alloys).

Item 413 of Appendix 5 reads "Industrial and marine gears and gear boxes, (other than for automative applications).

42. In para 2 of the show cause notice, it was alleged that "from the correspondence made available to the Department, it has been observed that M/s. Espi (New Delhi) Company placed orders on behalf of M/s. Espi Industrial Corporation for the supplies of components of Belarus Tractor UMJ-6AM as per list attached thereto for 50 sets on 8-7-1983 in confirmation to letter dated 1-7-1983 of M/s. V Traktoroexports USSR.The cost per unit indicated as Rs. 40,500/-. The components included in the list of components covered by the indent are as follows : (2) Power pack Components exclusively only for above tractor namely, cylinder block, Liner and Oil Sump, Cylinder head piston and connecting rod, Crank Shaft and Pulley, Timing gear cover and sealing, water pump, dynamo and starter motor, Flymicel and Gly wheel housing and fuel injection pump in component assemblies without radiator.

(5) Transmission assembly (with differential cover and lock) clutch, control linkage, brakes (discontrol hand and tailed) with rear axle, final drive housing (final drive hubs).

43. It was further stated in the show cause notice "the documents presented along with Bills of Entry to seek clearance of goods for following details : Invoice Nos. 61/13065 and 61/13066 describe to goods as "components of Belarus tractor UMZ-6AM as per list attached for 50 sets". Payment will be made at 180 days after the date of Bill of Lading as on 11-8-1984 under Bill of Lading of exchange 2910019 respectively. The enclosure along with the invoice refer to the split up prices of power pack components. The power pack is the engine assembly. The packing list enclosed describes the same as unitised assembly. The other items given quantity per set. This inter alia covers items such as Hydraulic Steering hydraulic booster, main fuel tank, clutch radiator along with the other items such as nuts, screws, bolts, sleeves, lock, gaskets, pipes etc." It was further stated in the show cause notice 'from the packing list it is observed that the description of the goods is given as under "Tractor UMZ-6AM in dis-assembled version - tractor parts and units".

The quality control certificate describes the goods as "Tractor in disassembled version." It is further added therein "Tractor units are produced as the tropical version and are preserved for a period of one year". This also . refers to marks and numbers as UMZ-6AM and N-3353, 12-14, 17, 18 and 335190 for the six pieces. The certificates have not been furnished in full for all the goods, therefore, other serial numbers are not available. It: is presumed that for other units also similar certificates have been furnished by the exporters to the importers.

It was further stated in the show cause notice during the course of investigation, it is disclosed that the items which have been imported and would be required to make a complete tractor from the imported components are as under : In para 9(iii) of the show cause notice, it was alleged that "Without prejudice to (ii) above, the import inter-alia covers power pack components exclusively for tractor. The break up prices of goods has been given in the enclosure to the invoice of imports. The list covers 15 items in one set for a total value of Rs. 9,761. 94 ps. per set. It appears that the goods imported under this category are engine in CKD condition. The Horse Power of the engine is 65 of HP. Thus value Rs. 9,76,194 in two Bills of Entries is covered by the Appendix 3 of Import Policy as diesel engine upto including 1350 HP are covered by Serial 470 of Appendix 3 of the Import Policy".

The finding of the Additional Collector reads "As regards the power pack, these items are complete except very minor parts such as filter, muffler, muffler shield and clip. This has been certified by supplier firm also. The Horse Power for this engine is 65 HP. They are imports in CKD condition of the engine and they will fall within the scope of Serial No; 470 of Appendix 3 of Import Policy of A.M. 84.

44. In their letter dated 16th July, 1984 the suppliers, among other things, have, while explaining the contents of factory packing list, No. 11, stated that our factory has used a word, which is not English.

By "Unitised assembly" they actually mean components in units. Further it also means that engine components, have been packed unitwise Engine parts do not form a complete diesel engine. For example, as above contract following engines parts are made in India and without which no engine is complete". Thereafter the suppliers have stated the parts which are required to make a complete engine and which are to be manufactured in India. They are : (1) Filter, (2) Muffler, (3) Shield, (4) Clip.

The Additional Collector has also recorded a finding that power pack items are complete except parts, such as, filter, muffler, shield and clip.

45. Now from the facts established, it is abundantly clear that only certain components of engines were imported. They were imported in the form of components and not in assembled form so as to make a diesel engine. Diesel engine has to be assembled from out of the imported components and some other components. The imported components, if assembled, also would not make a diesel engine because some more components have to be fitted into it. In the circumstances, the finding of the Additional Collector, that the diesel engines are imported in CKD condition and therefore, Item 470 of Appendix 3 would be attracted, appears not correct. Since diesel engine, as such, has not been imported as OGL item, the import is not hit by item 470 of Appendix 3.

I, therefore, set aside that part of the Additional Collector's order.

46. In so far as the other objected items, the finding of the Additional Collector is not clear or specific and it reads : "The importers in their written submissions as well as personal hearing have stated that the items like front axle, steering assembly, rear rim with tyres and tubes are required for tractors.

Tractors are items of automotive equipments falling under Chapter 87. They have further relied on the provisions of Import Policy para 146 page 43 of Import Policy AM 84. It is stated therein that motor vehicle include tractors. My attention is also drawn to the amendment in the Import Policy whereby the components of tractors have been included as a separate heading in Appendix 3 vide ITC Public Notice dated 12-1-1984. If the components of tractors were already covered by specific heading of automotive components there was no need to include them as such. Even in the current Import Policy AM 85 the Appendix 3 includes components of automotive and components of tractors under separate heading. It is, therefore, reasonable to assume that the intention of the Import Policy for the components for automotive application did not envisage to include components of tractors. In this context, the Import Policy of Appendix 3 also disclose that the components of tractors were covered by Appendix 5 as separate entry." According to the allegations contained in the show cause notice the item front axle with half frame assembly valued at Rs. 3,772.44 is covered by Item 413 of Appendix 5 as Industrial Gear Boxes. The Additional Collector did not record any findings as to whether the front axle with half frame assembly is an industrial gears or gear boxes. What cannot be imported under Appendix 10(1) by Actual User (Industrial) is industrial and marine gears and gear boxes. In the absence of a finding by the Additional Collector it has to be held that there is no proof that what had been imported was either industrial or marine gears or gear boxes. Admittedly, the appellants were registered as a small scale industrial unit. They were registered for manufacturing, processing activity of agricultural machineries/implements combined harvesters, seed cleaners and tractors.

The fair reading of the registration certificate would indicate that they were registered for manufacture of agricultural tractors. Further as per the agreement the foreign suppliers to supply components of agricultural tractors. There is a difference between agricultural tractors and industrial tractors. In Union of India v. Delhi Cloth Mills [AIR 1963 S.C. 791], the agricultural tractor is defined as under :- "Agricultural tractor a self propelled vehicle having wheels or tracks, designed primarily to operate trailer or mounted agricultural implements, and machines, including trailers and to supply power to operate them with the vehicle itself in motion or remaining stationery. In Mahendra & Mahendra v. Union of India and Ors. 1984 (18) ELT 262 (Bom.), Her Lordhsip Smt. Sujata v. Manohar (3) considered the distinction between the agricultural tractors and industrial tractors. It was observed on industrial tractors a hydraulic system with draft control and position control is not provided because these industrial tractors are used for hauling and material handling purposes only." 47. It was not contended and probably it could not be contended that what had been imported are marine gears and gear boxes and therefore there is no scope to invoke Item 413 of Appendix 5 and as such no objection can be taken for the import of front axle with half frame assembly or transmission assembly with differential control linkage, brakes with rear axle, drive housing etc. under OGL Appendix 10, Serial No. 1 of the Import Policy.

48. In the show cause notice, it was alleged that stearing assembly valued at Rs. 1,777.53 in two Bills of Entry along with draft control at Rs. 1,783.32 are hydraulic control assembly and are covered by Item 432 (17) of Appendix 3 of Import Policy A.M. 84. The contention of the importer was that sub-item 17 of Serial No. 432 covers hydraulic control assembly of industrial machinery. Fur automotive components there is a separate Serial No. 433 in the said Appendix. But under the Serial No. 433 hydraulic assembly has not been mentioned as one of the items coming under the scope of the said Appendix. The importers had also relied upon the clarification contained in DGTD's letter dated 7-10-1983. The contention of the importers appears untenable. The clarification given by the DGTD in their letter dated 7-10-1983 was to the effect that items in respect of which clarification sought are covered by Serial No. 89 of List 8 of Appendix 10 and they are permissible to be imported as OGL items subject to the conditions set out in that appendix. According to Appendix 10(1), raw materials, component, consumables which are covered by Appendix 3, 4, 5, 8, 9 & 15 cannot be imported by Actual User (industrial). Therefore, the DGTD's clarification in no way helps the appellant. Further, the contention of the appellant that sub-item 17 of Item 432 of Appendix 3 covers hydraulic assembly of industrial machinery cannot be accepted. In the Bombay decision referred to above, it was clearly held that industrial tractors would not be provided with hydraulic system with draft control and position control. The contention of Shri Gagrat that tractor is an automotive and it would fall within Item 433 of Appendix 3 is difficult to accept. In the Policy a clear distinction is made between tractors and automotive.

49. The next item objected to in the show cause notice was rear wheels with tyres and tubes on the ground that they are covered by Items 351 of Appendix 3. The contention of the importers, however, was that tyres fitted automotive applications are excluded from the scope of Serial No. 351 Appendix 3 and that tyres and tubes for tractors fall in the category of tyres and tubes for automotive applications. They further relied upon the clarification contained in DGTD's letter dated 7-10-1983. I have already considered the scope of the DGTD's letter dated 7-10-1983 and further considered the contentions that tractors is an automotive and rejected the appellant's contention. Having regard to the sweep of Item 351, Appendix 3 the import of tyres and tubes under OGL at the relevant time was impermissible as OGL items and therefore, the Customs authorities were justified in contending that the tyres and tubes which are admittedly made of rubber would be rubber products within the meaning of entry 351 of Appendix 3. The Department however, has taken the value of rims also but that value has to be excluded.

(1) What had been imported by the appellant are not tractors but only components of tractors. Further, the imported components if assembled also would not make a complete tractor. Number of components required to make a complete tractor are not imported and therefore it cannot be contended that import was tractor in dis-assembled or CKD condition. The assembly of components of tractors would itself be a manufacturing process as the assembly of tractors cannot be done by a screw driver technology. It would involve several stages needing sophisticated technology and testing methods as contended by the appellant, (2) What had been imported are not complete diesel engine or diesel engine in CKD condition but only components of diesel engines. The components imported even if assembled would not make a complete diesel engines. Certain important components required to make a complete diesel engine were not imported.

(3) The import of front axle with half frame assembly as well as the items transmission assembly with a differential clutch control brake, rear axle, drive housing etc. are not either gears of gear boxes of industrial tractors and therefore the objection raised by the Department that they would fall under or covered by Item 413 of Appendix 5 is erroneous. They are not covered by that item and therefore they could be imported as components of tractors by the appellants as Actual User (Industrial) under OGL under Appendix 10(1).

(4) The steering assembly imported by the appellant would be covered by Item 432 of Appendix 3 and therefore they cannot be imported as OGL items under 10(1).

(5) The tyres and tubes imported would be covered by Serial No. 351 Appendix 3 and they cannot be imported under OGL under Appendix 10(1).

51. The only other aspect that remained for consideration is about the fine levied in lieu of confiscation. The Additional Collector had levied fine of Rs. 10 lakhs in respect of each consignment. He had held that all the items imported are liable to be confiscated but then as has been held earlier, the appellant did not import tractors as such or diesel engines as such nor did they import the tractors or diesel engine in CKD condition. Further, the component of power packs as well as the item of front axle with half frame assembly and other components did not fall under Item No. 413 of Appendix 5 and therefore their import was permissible under OGL under Appendix 10(1). In the circumstances, and having regard to the fact that there has been a relaxation in the Policy regarding obtaining of a licence and having regard to the recommendation, of the Development Commissioner, Small Scale Industry, Ministry of Industry dated 16-7-1984 and taking into consideration that the imports are not for trade purposes, while maintaining confiscation of steering assembly and tubes and tyres, I reduce the fine in lieu of confiscation from Rs. 10 lakhs to Rs. 1,00,000 (Rupees One lakh only) in respect of each consignment. The order of confiscation of other items are set aside.

52. In the result this appeal is allowed in part. The confiscation of the components of power pack as well as front axle with half frame assembly and other components treated as gears or gear boxes are set aside. The confiscation of steering assembly, draft control, hydraulic control assembly and tyres and tubes is confirmed but the amount of fine in lieu of confiscation is reduced from Rs. 10 lakhs to Rs. one lakh in respect of each consignment. The appellant be granted consequential relief.

53. As there is difference of opinion between the two Members, the records of the appeal be submitted to the President for referring the following points of difference to one or more other Member of the Tribunal : (1) Whether what had been imported are tractors and diesel engines in unassembled condition or are only certain of the components of the tractors and diesel engines.

(2) Whether the import of power packs in the manner in which they were imported was covered by Serial No. 470 of Appendix 3 of the Import Policy 1983-84, (3) Whether the item Front Axle with half frame assembly and other components are gears or gear boxes of agricultural tractors or industrial tractors and if they are of agricultural tractors can they be objected to as falling or covered by Item 413 of Appendix 5.

(4) Whether the registration certificate granted to the appellant was valid or not valid to cover the goods imported at the time when the appellant sought clearance, (5) Whether the Customs authorities are competent to go into the validity of the registration certificate.Bombay, 27th January, 1986.

(K. Gopal Hegde) Member (Judicial).

55. Since there is a difference of opinion between myself and the Judicial Member, the matter requires reference to the President Under Section 129C(5) of the Customs Act to determine whether in the facts and circumstances of the case, the two imports covered by the appeal offend the Trade Control Regulations and the penal action taken by the Additional Collector of Customs is correct or not.Bombay, (K.S. Dilipsinhji)3.2.1986 Member (Technical) 56. Difference having arisen between Brothers Shri K.S. Dilipsinhji, Member (Technical) and Shri K. Gopal Hegde, Member (Judicial) in respect of the present matter, the matter was Under Section 129C(5) of the Customs Act, 1962 referred to the President of the Tribunal, who referred the matter to me for my opinion.

57. According to Brother Shri Hegde, the points of difference are as follow : "1. Whether what had been imported are tractors and diesel engines in unassembled condition or are only certain of the components of the tractors and diesel engines, 2. Whether the import of power packs in the manner in which they were imported was covered by Serial No. 470 of Appendix 3 of the Import Policy 1983-84, 3. Whether the item Front Axle with half frame assembly and other components are gears or gear boxes of agricultural tractors or industrial tractors and if they are of agricultural tractors can they be objected to as falling or covered by Item 413 of Appendix 5.

4. Whether the registration certificate granted to the appellant was valid or not valid to cover the goods imported at the time when the appellant sought clearance, 5. Whether the Customs authorities are competent to go into the validity of the registration certificate." 58. According to the reference dated 3-2-1986 of Brother Shri Dilipsinhji, the matter required reference to determine whether in the facts and circumstances of the case, the two imports covered by the appeal offend the Trade Control Regulations and the penal action taken by the Additional Collector of Customs is correct or not.

59. From the impugned order it is observed that the Additional Collector of Customs, Bombay in respect of Bill of Entry No. 2783/25 having been made in contravention with the provisions of Section 111(d) of Customs Act, 1962 read with Section 3(2) of Imports & Exports Control Ac, 1947 ordered the terms of the bond to be enforced for a sum of Rs. 10 lacs towards fine in lieu of confiscation. Goods covered in respect of Bill of Entry No. 2783/24 valued at Rs. 20,26,500/- were also ordered to be confiscated with option to the appellants to redeem them on a fine of Rs. 10 lacs. From the order of Shri Dilipsinhji it is seen that in his view the Additional Collector's order was correct both on the grounds of fact and on law and he proposed to confirm the same and reject the appeal. From the order of Shri Hegde it is seen that he proposed to uphold the order of the Additional Collector in so far as it related to confiscation of steering assembly, draft control, hydraulic control assembly and tyres and tubes and reducing fine in lieu of confiscation from Rs. 10 lacs to rupees one lac in respect of each consignment. He proposed to set aside the remaining part of the order. It would thus be seen that though Brother Shri Dilipsinhji may not have given a specific finding with respect to each of the items or consignment, they were in agreement with respect to confiscation of the items proposed by Brother Shri Hegde, though not specifically with the reduction in quantum of redemption fine in respect of these items proposed by. Brother Shri Hegde from Rs. 10 lacs to rupees one lac in respect of each consignment. This quantum of redemption fine can, however, be said to cover the point of difference proposed by Brother Shri Dilipsinhji and I would proceed on that assumption.

60. Facts have been set out in the orders of Brothers Shri K.S.Dilipsiphji and Shri K. Gopal Hegde and their further repetition appears unnecessary. Arguments advanced by the advocate for the appellants and Shri G.D. Paul, SDR, for the respondent would be briefly referred to.

61. At the hearing of the matter before me Shri Gagrat, learned Counsel for the appellants reiterated the grounds urged by him before the Bench. He referred to various relevant provisions and submitted that the appellants were Actual Users and on the date of filing Bills of Entry fulfilled the requirement of para 21(a) inasmuch as they had furnished declaration giving particulars of their registration as an Actual User (Industrial) with the General Manager, District Industries Centre, Faridabad, who according to the Hand Book of Import Export Procedures 1983-84 is sponsoring authority for units in the Small Scale and Cottage Sectors had affirmed that the registration" had not been cancelled or withdrawn or otherwise made inoperative and items imported under OGL were strictly in accordance with the terms and conditions of their registration with the sponsoring authority. He also submitted that the phased programme, had been filed with the General Manager. His further submission was that clarification was given by D.G.T.D. in respect of the imports and it was not open to the Customs authorities to sit in judgment over the certificate. They could not also examine the correctness or otherwise of the registration with the sponsoring authority. He also submitted that what had been imported by the appellants were not tractors or diesel engines but only components of the same. Components could not go to make complete tractor or diesel engines and required a number of complementary components. In that connection attention was drawn to list of 135 components as contained in Enclosure No. 1 to Contract No. 61/01-3341 of 29th July, 1983. The list contains names of 135 parts like filter, muffler, shield, clip, cap, gasket, bracket, wire, wire bundle, terminal, bushing, crip, cellar, gasket, washer, electric bulb, horn, headlamp, terminal strip, number plate lamp and the like and contended that in view of this the imported items could not be called tractor or diesel engines. He also invited attention to Notification dated 16-2-1973 No. S.O.98(A)/IDRA/29B/ 73/1 issued by the Central Government in exercise of powers conferred by Sub-section (1) of Section 29B of the Industries (Development & Regulation) Act, 1951 which, inter alia, exempted small scale units from operation of the provisions of Sections 10, 11, 11A and 13 of the Act. Attention in that connection was also drawn to the amendment of the Notification by Notification S.O. 222(E) dated 30-3-1984. By this amendment in Schedule IV after Entry No. 8, "9.

Tractors and self propelled combine harvesters" was added. The notification further stipulated that no owner of any industrial undertaking which was previously exempted from the operation of Sections 10, 11, 11A and 13 of the Act, shall carry on the business of such undertaking except under and in accordance with a licence issued in this behalf by the Central Government. He submitted that the appellants had to obtain a licence in view of this amendment in the notification but at the relevant time the Industries (Development & Regulation) Act, 1951 was not applicable to the appellants in view of the exemption to the small scale units and reliance therefore by the Technical Member on the said was not correct. He also attempted to argue on the points in respect of which there was no difference between the Members constituting the Regional Bench hearing the appeal but he was not allowed to do so. He further submitted that the Customs had realised duty in respect of the goods holding that they were components and it was not permissible now for them to say that the goods were not components. He also argued that the appellants had acted on the understanding held out to them by the competent authorities and the Customs were promissorily stopped from going back from these representations. Shri Gagrat further submitted that it was not open to the Customs authorities to question the validity of the certificate granted by the General Manager, District Industries Centre, Faridabad.

At best the Customs can only ask him to modify the certificate. Shri Gagrat relied on the following precedents : (1) Bombay Chemicals Private Ltd. v. Union of India and 14 Ors. 1982 ELT 171(Bom.);Union of India and Ors. v. Godfrey Philips India Ltd. and Ors., 1985 (22) ELT 306 (S.C.).

62. Shri Paul supporting the order of the Technical Member submitted that what were claimed as components of tractors and diesel engines were, in fact, tractors and diesel engines as they had acquired the essential character of the same. For the purpose he relied on Rule 2(a) of Rules of Interpretation of the First Schedule in the Customs Tariff Act, 1975 read with Para 244 of the Policy which says that these rules will apply to the clearance of consignments imported under this policy.

He also submitted that the clarification of DGTD in matters of classification is not binding on the customs authorities. In particular, he referred to para 245(1) of the policy under which in respect of matters not covered by earlier paras relating to Actual Users, Chief Controller of Imports & Exports would be addressed for interpretation of the policy. He submitted that the Technical Member rightly held that tractors were capital goods. It was also submitted that the Customs authorities had addressed a communication to the Director of Industries, Haryana about the appellants' registration and in view of his telegram and later silence the Customs authorities were justified in concluding against the appellants. In support of his argument Shri Paul relied on the following precedents :Collector of Customs, Madras v. K. Ganga Setty [AIR 1963 (SC) 1319];V.V. Iyer of Bombay v. Jasjit Singh Collector of Customs and Anr.Western India Garments Ltd. v. Collector of Customs, Bombay 1984 (18) ELT 588 (Tribunal).

63. Before the arguments are considered it would be useful to reproduce para 21(a) of Appendix 10 :- "21(a) All Actual Users at the time of clearance of goods shall furnish to the Customs authority a declaration giving particulars of their Industrial Licence or Registration as an Actual User with the concerned authorities namely, the number and date of the Industrial Licence/Registration and the end-product(s) of manufacture, and affirming that the Industrial Licence/Registration has not been cancelled or withdrawn or otherwise made inoperative and (ii) the items imported under OGL are strictly in accordance with the terms and conditions of their industrial licence/registration with the sponsoring authority concerned as an industrial unit and their approved phased manufacturing programme in case no phased manufacturing programme has been approved for them, they should say so in the declaration. In cases, where separate registration number is not allotted by the. sponsoring authority concerned, the importers shall produce other evidence to the satisfaction of the Customs authorities that they are registered as industrial units and eligible to the import made. Actual Users (Industrial) shall also furnish, at the time of clearance of goods, a certified copy of phased manufacturing programme, if any, approved for them by the sponsoring authority or other concerned authority." From the foregoing it would be seen that the appellants at the time of clearance of goods were required to furnish to the Customs authorities a declaration, inter alia, their registration as an Actual User with the concerned authority and in particular a declaration that items imported under OGL are strictly in accordance with the terms and conditions of the registration with the sponsoring authority concerned as an industrial unit under an approved phased manufacturing programme.

In case no phased manufacturing programme has been approved for them they should have said so in the declaration. What has to be examined whether the declaration made by the appellants that items imported under OGL were strictly in accordance with the terms and conditions of their registration with the sponsoring authority was acceptable.

64. This point is discussed by Brother Shri Hegde in paras 12, 13 and 14 of his order. After referring to appellants letters dated 31-3-1983 and 1-7-1983 at pages 39 to 44 and 45 to 53 and argument of SDR Shri Paul criticising reliance on these letters by the appellants on the ground that pages 43 and 44 (Technology of Tractors and Paddy Transplanters) were not produced by the appellants before the Customs authorities and this contention was not applicable in view of the list of associates given in Enclosure 'C' to their letter dated 1-7-1985 (Ex. B at page 45), Brother Shri Hegde in para 14 after referring to the documents above described observed "the above documents or other documents in the file do not establish in clear terms that there was positive representation on the part of the appellant that no components would be imported." In later part of the same para he held :- "It was the General Manager of the District Industries Center which granted the provisional certificate adding tractor as one of the manufacturing items in the certificate of registration. The General Manager did not attach any condition. The certificate did not state that import of components are not permitted. In the absence of such a condition the import cannot be objected to by the Customs authorities on the ground that at the time of making an application for registration there was a representation that no components would be imported." The Customs authorities were entitled to enquire into the correctness of the appellants declaration on the point that items imported under OGL are strictly in accordance with the terms and conditions of their registration with the sponsoring authority. Before the items imported would be said to be in accordance with the terms and conditions of the registration, there must be some terms and conditions to accord with.

As would be seen Brother Shri Hegde has not recorded any finding excepting the appellants' argument as to the fact that import of components having been brought to the notice of the sponsoring authority, he has held that the documents or other documents in the file do not establish in clear terms that there was positive representation. About the approved plan he has held that there is no acceptable evidence as to inclusion or non-inclusion of letter dated 31-3-1983 (relating to the phased programme). In my view whether import of components was in accordance with the terms and conditions of the registration has to be decided not on the basis of certificate alone but on the basis of contemporaneous correspondence. The matter on record shows that the Department in that connection sought clarification from the Director of Industries, Haryana who one could presume is higher in status in the hierarchy to the General Manager, District Industries Centre and from his reply it appears that the appellants had given out that assembly of tractors was based primarily on indigenous components and import was not recommended. To a further telegram dated 22-12-1984 Director of Industries did not reply. The Director of Industries, in case he was not competent to reply, could have said that the matter may be referred to General Manager, District Industries Centre but he did not say so. He is higher in status to the General Manager. His reply cannot be ignored on the ground that registration certificate issued by the General Manager of the District Industries Centre did not prohibit import of components. In my view, in this state-of-affairs merely because the registration certificate was silent on the point of import of components could not make the import of components strictly in accordance with the terms and conditions of the registration. On point No. 4 of difference, therefore, as formulated by Brother Hegde - "Whether the registration certificate granted to the appellant was valid or not valid to cover the goods imported at the time when the appellant sought clearance." my finding would be that registration certificate was not valid to cover the goods imported.

65. In view of this finding, findings against other points formulated by Brother Shri Hegde appear unnecessary, but I would briefly deal with the same.

66. As to point No, 1 formulated by Brother Hegde whether the imports were tractors or diesel engines in unassembled condition, Brother Shri Dilipsinhji did not accept the appellants argument that DGTD certificate should be accepted. He held that it is a question of fact and cannot be decided on the basis of D.G.T.D.'s letter alone. Relying on the description in Packing Specification and Quality Control certificate as also Rules of Interpretation, he held that goods were tractors in knocked down condition and not components or parts thereof.

He did not accept the argument that DGTD certificate was final and distinguished the Supreme Court decision in Union of India v. Tarachand Gupta [AIR 1971 (S.C.) 1158]. He did not record a specific finding about diesel engines.

67. Brother Shri Hegde relying on letter dated 16-7-1984 from the suppliers to the appellants (at pages 170 to 172) stating that incorrect expression had been used and explaining the description in packing list and to the meanings of the words tractor in disassembled version mean only components of tractor and never a complete tractor and unitised assembly means components in units, and a diesel engine never being complete without a filter, muffler, shield, clip and stating that what was supplied by them were only components of tractors, on his own reasoning held back that what were imported were not tractors or diesel engines in unassembled condition and proposed to set aside the finding of the Additional Collector on this ground. To me it appears that the explanation given by the supplier in their letter dated duly 16, 1984 is not with reference to Rules of Interpretation of the First Schedule in the Customs Tariff Act, 1975 which under para 244 of the Policy is to apply. Applying Rule 2(a) of the Rules of Interpretation, an incomplete or unfinished article if it has the essential character of the complete or finished article would merit classification as complete or finished article even if imported unassembled or dis-assembled. As for Shri Gagrat's argument that para 244 of the Policy providing for application of rules for interpretation in Schedule to CTA 1975 applies only when paras 242 and 243 do not apply and therefore the clarification from D.G.T.D. would be preferred to this interpretation, it is sufficient to say that in giving clarification D.G.T.D. cannot ignore para 244 of the Policy and the Rules for Interpretation. If it is done in violation of these provisions, no weight could be attached to the clarification.

68. As for Shri Gagrat's reliance on Bombay High Court decision in Bombay Chemicals Pvt. Ltd. v. Union of India and Ors. 1982 ELT 171 (Bom) for the argument that certificate issued by D.G.T.D. is binding on Customs authorities, it is observed that in this case the certificate was a precondition for claiming exemption under Notification dated 1-3-1968 and that certificate had been produced by the importer before the Customs authorities. The certificate was given in obedience to statutory provision. That decision could not be taken to be an authority in respect of clarification given by D.G.T.D. in violation of the statutory provision. I do not accept this argument of Shri Gagrat. I would therefore hold that for the purpose of policy the imported goods merited treatment as tractors and diesel engines and not components of the same.

69. As to point of difference No. 3 formulated by Brother Hegde, Item 413 of Appendix 5 reads "Industrial and Marine Gears and gear boxes (other than for automative applications), the issue has been discussed by Brother Hegde partly in para 28 and partly in para 31 and finding is to be found in para 33 where he says that it was not contended and could not be contended that what had been imported was marine gears and gear boxes and, therefore, Item 413 of Appendix 5 could not be attracted. Shri Dilipsinhji has not given any specific finding.

However, no specific finding against this point on my part appears necessary because admittedly these items were imported only as what were claimed to be component parts of tractors/diesel engines and I have above found that the goods imported deserve treatment as tractors and diesel engines. Their import would also have to be treated as not permissible under OGL.

70. In view of the findings against four points formulated by Brother Shri Hegde, no specific finding in respect of point No. 5 appears necessary. It may, however, be observed that the certificate of registration is to be taken into consideration for determining whether the importer is an Actual User. Whether or not the importer is Actual User can be determined only after examining the certificate with reference to the imports. In Western India Garments Ltd. v. Collector of Customs, Bombay 1984 (18) ELT 588. West Regional Bench held that Customs authorities are empowered to enquire whether importers are Actual Users. This decision would lend support to Shri Paul's argument that Customs authorities can in the given set of circumstances examine the correctness of the registration certificate.

71. As for Shri Gagrat's reliance on Notification Nos. S.O. 98(E)/ IDRA/29B/73/1 dated 16-2-1973 and S.O. 222(E) dated 30-3-1984 and the argument that in view of these notifications material provisions relating to registration, licence and the like were not applicable to small scale units to which class the appellants belong, it does appear that the provisions of Industries (Development & Regulation) Act, 1951 were not applicable to the appellants. However, this argument would not help the appellants case in the view taken by me that the import of the goods was not in accordance with the registration of the appellants within the meaning of para 21 (a) of the Policy.

72. As for Shri Gagrat's argument that goods were assessed as components of tractors and diesel engines for the purpose of Customs duty and it was not open to the Customs to treat the goods as tractors and diesel engines, it is sufficient to say that classification under two different enactments - Customs Tariff Act, 1975 and Import & Export Central Act, 1947 and the Import & Export Policy need not always correspond. It is well settled that in such matters there is no estoppel. Besides, from the order of the Additional Collector (para 27) it is seen that according to him it had been provisionally assessed by the Group. Therefore, this argument does not help the appellants.

73. I would answer the point for difference formulated by Brother Shri Dilipsinhji as follows :- "On the facts and circumstances of the case the two imports offend import control policy and the action taken by the Additional Collector of Customs is correct." 74. The point of difference in this appeal was referred by the President in terms of Section 129-C(5) of the Customs Act to third member Shri S.D. Jha, Vice-President (J) who has now recorded his opinion.

75. As per Section 129-C(5), the appeal is to be disposed of in terms of the majority view. Accordingly, the import of the 2 consignments is held to violate the Import Trade "Control Regulations. The order of the Additional Collector is accordingly confirmed and the appeal of M/s.

Espi Industrial Corporation is rejected.