1. This appeal is filed by M/s. R. Maganlal & Co., Bombay against Order-in-Original No. 9/Collr/1989 dated 31-3-1989 passed by the Collector of Customs & Central Excise, Rajkot.
2. The facts of the case, briefly stated, are that the appellants imported at the Port of Kandla a consignment of 212.900 M. Tonnes of "Low Density Polyethylene" ('L.D.P.E'; for short), valued at Rs. 22,52,095.47. According to the narration of facts in the appeal memo, the appellants had no credit facilities with M/s. M.G. Chemical Company Inc. of New York, the suppliers of the goods. So, the goods were ordered through an agent M/s. Dhimeet Ltd., Ontario, who established an irrevocable letter of credit in favour of the supplier company for the supply of 200 M. Tonnes of L.D.P.E. "Natural Virgin manufactured by Dupont packed in 25 kg bags Product Code 0 9952 with Melt Index from 3.0 to 5.5 Density 0.922/993". However, when the documents were received through the banker, the appellants found the description of the goods as - "L.D.P.E. Virgin off Specs Natural Film Grade by Dupont with small amount of Surlyn and Ava Melt Index approximately 2.0, Density 0.922".
This was the description of the goods in the invoice of M.G. Chemical Inc., Lloyd's Certificate of Insurance, the Packing List, the Certificate of Origin and the Bill of Lading. On the appellants contacting the suppliers' agent regarding the discrepancy, the appellants, it would appear, were informed that the goods were L.D.P.E.virgin material, slightly off specification, mixed with a small amount of Surlyn which was a modified L.D.P.E. of the same grade. According to the appellants, on the basis of this assurance, they agreed to overlook the discrepancy, accepted the documents and the consignment. Twelve bills of entry were filed for clearance of the goods. Examination of the goods by the Customs revealed that they were wet and mixed with impurities. At this, the appellants sent a telex to the suppliers on 6-1-1988 protesting that the goods were not in conformity with the specifications stated in the import documents, that the material was wet, contaminated with foreign articles, yellowish and not natural in colour, of sub-standard quality, full of sweeping and unfit for use. It was further stated that, in the circumstances, the goods and the documents were not acceptable and that the suppliers should depute some one for examination of the goods. The suppliers were reminded by a telex on 2-2-1988 but no reply was received. The appellants then arranged or surveys of the consignment to be conducted by S.G.S. India Pvt. Ltd. and Tata Tea Ltd. as agents for Lloyds. The former's survey was conducted on 13-1-1988. On the basis of random selection of 10% of the bags, the report revealed that :- "1. All the bags except few were observed to be intact at the time of survey. Some bags were torn during destuffing and stacking operation.
2. Approximately 45 to 50 bags of the samples drawn contained apparently sound material. Balance approx. 90% bags contained either discoloured, wet or admixed with foreign material including some powder.
"CONCLUSION.:- On the basis of our findings at the time of survey, we observe that- (1) the description of the goods mentioned in the L/C "LOW DENSITY POLYETHYLENE NATURAL VIRGIN BY DUPONT, PACKED IN 25 KG BAGS PRODUCT CODE-08925 WITH MELT INDEX FROM 3.0 TO 5.5 DENSITY 0.922/993" varied from that mentioned in the invoice.
(2) the order specifically asks for DUPONT make material and there is no evidence that the material is manufactured by DUPONT, either observed on the bags or in any other documents.
(3) similarly, the contents of the bags which were generally sound were of mixed quality as against the ordered material as Low Density Polyethylene Virgin of uniform quality.
Tata Tea Ltd. also conducted the survey on 13-1-1988. Their report inter alia revealed that :-8(a)"Description of loss/damage : (a) Contamination (b) After examination, cause attributed by : (b) Damage appears to surveyor have occurred prior to shipment." "(1) As far as could be seen the above bags were externally sound, intact and unstained.
(2) As requested by the consignees about 10% of the cargo was segregated by selecting bags at random from various section of the stacks and the said bags were subjected to detailed inspection as regards condition of the contents.
(3) Out of the number of bags inspected, 5% bags contained apparently sound cargo.
(4) In the balance 95% of bags the contents were discoloured and/or wet and/or admixed with foreign matter including some powdery substance. The globules in these bags also were of different shades.
(5) Samples of sound and contaminated cargo were drawn and was subjected to analysis.
The sample of contaminated cargo contained 9.01% (by weight) excess moisture/extraneous matter as compared to the sound sample.
In view of the fact that all the bags were externally intact and sound, it would not be possible to segregate the bags with sound contents from the rest and therefore we had to confine the inspection to inspection of the 10% bags.
Since the bags have arrived destination without any external damage, in the absence of any indication to show that the damage was caused en route we infer that the goods were packed in the same condition as was shown to us.
A third survey conducted apparently on behalf of the Steamer Agents by C.P. Dave & Sons revealed more or less the same results as in the Tata Tea Ltd.'s survey. In these circumstances, the appellants caused a complaint to be filed on 14-7-1988 against the suppliers in the United States District Court for the Southern District of New York alleging that the goods supplied were of such inferior quality to that ordered that they were wholly worthless and useless to the appellants and claiming various sums towards cost of the goods and the damages suffered by the appellants. (This case, the Bench was informed, was pending in the United States Court).
3. On 11-10-1988, the Deputy Collector of Customs, Kandla, issued a notice to the appellants asking them to show cause why the goods should not be confiscated under clause (d) of section 111 of the Customs Act, 1962 on the ground that the goods being disposal goods were not covered by the import licence produced for their clearance. It was further alleged that the goods were classifiable under sub-heading No. 3901.90 and not 3901.10 (as claimed by the appellants) of the First Schedule to the Customs Tariff Act, 1985 ('the Schedule', for short). The goods were misdeclared on the bill of entry which rendered them liable to confiscation under section 111 (m) of the Customs Act. The appellants had rendered themselves liable to penalty under section 112 of the Customs Act. By their reply dated 4-11-1988, the appellants denied all the allegations. In due course, and after hearing the appellants, the Collector of Customs, Rajkot passed the impugned order whereby he - confiscated the goods under section 111(d) and (m) of the Customs Act, however, levying a redemption fine of Rs. 11.5 lacs; - imposed a penalty of Rs. 75,000 on the appellants under section 112 (a) (i) and (ii) of the Customs Act; and - order classification of; and assessment of duty on, if the goods under subheading No. 3901.90 of the Schedule.
4. We have heard Shri K. Srinivasan, Consultant, for the appellants and Shri A.S. Sunder Rajan, DR, for the respondent-Collector.
5. Detailed examination of the goods by the Customs had revealed that the goods were packed in paper bags without marking to indicate the type/grade of goods. Of the 8516 bags, 7103 were found to be intact with no damage and the balance were found to consist of powdery material and foreign off white/discoloured substances in the form of granules. The goods were subjected to test with the following results - Test Report. "Sample is in the form of transparent granules of polyethylene type". A note has also been attached as under :- Note : "The observations determined on the samples under reference are fairly in agreement with those given for "surlyn". In the literature available here "surlyn" has been described as polyethylene comethacrylic acid - a modified polyethylene manufactured by M/s. Dupont.
Test Report. "Samples as received is heterogeneous mixture containing powdery material, transparent granules and very small amount of whitish granules. It is polyethylene type. The test report was having a note attached.
Note : The powdery material is low density polyethylene whereas observations determined on the transparent granules are fairly similar to surlyn. Regarding the details of surlyn, attention is invited to note to T.M. No. 898/5-8-1988.
Test Report. "Sample as received is heterogeneous mixture containing transparent granules, whitish granules, with very small amount of powdery material. It is of polyethylene type. The note attached with the test report indicated.
Note : The whitish granules are low density polyethylene whereas observation determined on the transparent granules are fairly similar to surlyn. Regarding the details of surlyn attention is invited to note attach to T.M. No. 898/5-8-1988 (Lab No. KCL/Imp/690/5-8-1988).
Test Report. "Sample as received is heterogeneous mixture containing transparent granules whitish granules with very small amount of powdery material. It is polyethylene type. The note attached into the test report indicated as under: Note : The whitest granules are low density polyethylene whereas observation determined on transparent granules are fairly similar to surlyn. Regarding the details of surlyn attention invited to note attached to T.M. No. 898/5-8-1988 (Lab No. KCL/Imp/690/5-8-1988).
Test Report. "Sample is in the form of transparent granules of polyethylene".
Note : The observations determined on the sample are fairly similar to surlyn. In the literature available, surlyn has been described as polyethylene & Methacrylic acid a modified polyethylene, manufactured by Dupont." (Reproduced from the impugned order with all the mistakes therein). It is on the basis of the above that the Customs alleged that the goods were not L.D.P.E. as declared but were classifiable under sub-heading No. 3901.90 of the Schedule.
6. As the learned counsel submitted, "surlyn", according to "Plastic Material" by J.A. Brydson is a co-polymer of ethylene, i.e., an "ionomer" with a small amount (1-10%) of an unsaturated carboxylic acid such as crylic acid using the high pressure process. Surlyn is a patented product of Dupont. The "Encyclopaedia of Polymer Science and Technology" says :- "lonomers : In 1964, introduction of a class of polyolefins having pendant carboxylate groups associated with monovalent and some times divalent cations was announced by both Dupont and Union Carbide.
These products are rather different from other ethylene co-polymers and are best treated separately." It is Shri Srinivasan's submission that in the co-polymer of polyethylene and methyl acrylic acid, i.e., Surlyn, polyethylene predominates. He relies on the explanatory notes to the Harmonised Commodity Coding System & Description ("HSN") at page 557 in support of his contention that the monomer (in this case, ethylene) contributes 95% or more of the co-polymer which is classifiable under the heading appropriate to the polymer of that monomer. In this context, he relies also on statutory Chapter Note 4 to Chapter 39 of the Schedule. In the present case, ethylene is the predominant monomer in the co-polymer "Surlyn". Hence, the latter is classifiable under sub-heading No.3901.10 as LDPE.7. The learned Departmental Representative Shri Sunder Rajan's reply to the above submissions is that the goods, as revealed by the test results, are a physical mixture of L.D.P.E. with Surlyn. Therefore, Chapter Note 4 to Chapter 39 does not come into play. (Shri Srinivasan clarifies that he referred to this note only with reference to "Surlyn"). A co-polymer must comprise of two monomers. Here, the goods are a physical mixture of L.D.P.E. and Surlyn. There is no evidence as to the percentage of L.D.P.E. present in Surlyn. While LDPE is classifiable under sub-heading No. 3901.10, Surlyn, being a modified polymer, will fall under sub-heading No. 3901.90. The goods being a mixture, the Collector has rightly invoked Section 19 of the Customs Act and classified the goods under sub-heading No. 3901.90 which carries the higher rate of duty. Subheading 3901.10 covers only L.D.P.E. simpliciter. To a question from the Bench, the learned D.R.replies that since it is not known as to which component contributes the essential character of the goods, Rule 3(b) of the Rules for interpretation of the Schedule has no application. Section 19 of the Customs Act is more appropriate to deal with the present case.
Otherwise, section 19 will be rendered nugatory.
8. In his rejoinder, Shri Srinivasan submits that section 19 which deals with goods consisting of a set of articles has no application to the present case. It does not refer to mixtures which are governed by Interpretation Rule 3(b).
9. We have considered the above submissions. There is no dispute that Surlyn is an ionomer resin. An ionomer resin, according to the "Condensed Chemical Dictionary" (pp 568-569) is a copolymer of ethylene and a vinyl monomer with an acid group such as methacrylic acid. Such resins are crosslinked polymers in which the linkages are ionic as well as covalent bonds. There are positively and negatively charged groups which are not associated with each other, and this polar character makes these resins unique. A "copolymer", according to the same dictionary (p. 273), is an elastomer produced by the simultaneous polymerization of two or more dissimilar monomers. Page 556 of Kirk-Othmer's "Encyclopaedia of Chemical Technology" (Supplement-IIIrd Edition) lists "Surlyn" manufactured by Du Pont as a commercial ionomer-poly (ethylene-co-methacrylic acid) and indicates its use as a "modified thermoplastic". It further says that typically, 3-6 mol% acrylic or methacrylic acid is incorporated in the commercial polymer - poly (ethylene-co-methacrylic acid) ionomer. At page 565, there is a passage on Crystalline Ethylene-Methacrylic Acid lonomers. It says that ionomers based on the polyethylene backbone exhibit a number of characteristic properties including excellent tensile properties, good clarity, and high melt viscosities. These properties are typically manifested at 20-80% neutralization with copolymers containing 3-10 weight % methacrylic acid. "Surlyn" is stated to find broad application in packaging films.
10. From the above narration, it is clear that "Surlyn" is a co-polymer of ethylene and methacrylic acid, the latter being present to the extent of not more than 10%. It is a modified polyethylene according to the test report. It is a co-polymer according to technical literature.
"4. For the purposes of this Chapter, except where the context otherwise requires, copolymers (including co-polycondensates, co-polyaddition products, block copolymers and graft copolymers) and polymer blends are to be classified in the heading covering polymers of that comonomer which predeminates by weight over every other single comonomer, comonomers whose polymers fall in the same heading being regarded as constituting a single comonomer.
If no single comonomer predominates, copolymers or polymer blends, as the case may be, are to be classified in the heading which occurs last in numerical order among those which equally merit consideration.
The expression "copolymers" covers all polymers in which no single monomer contributes 95% or more by weight to the total polymer content." 12. As noted earlier, surlyn is considered as a copolymer in technical literature. It would appear that, by virtue of Chapter Note 4 of Chapter 39 of the Schedule, the predominant constituent, namely, LDPE will determine the heading under which the" substance falls.
Polyethylene falls under heading No. 39.01 There are two sub-headings - 3901.10 - "Polyethylene having a specific gravity of less than 0.94" and 3901.20 -"Polyethylene having a specific gravity of 0.94 or more".
The other sub-heading which has been invoked by the Department is - 3901.90 - "Other". In the present instance, the import documents show the density as 0.922. The Department does not seem to have tested the sample for its density. At any rate, no evidence has been placed before us in this regard. Therefore, the unrebutted figure of density, namely, 0.922 should be deemed to be the density of the goods.
13. In the present case, there is no evidence on record to show whether the surlyn component of the subject goods contains 95% or more of polyethylene. If polyethylene predominates to the extent of being 95% or more, surlyn would not be a "co-polymer" within the meaning of the term as defined in Statutory Note 4 to Chapter 39. In that case, it would be a "homopolymer" (see explanatory note on page 551 of Vol. II of the HSN which says : "A polymer in which any one monomer contributes 95% or more by weight to the total polymer content is known as a "home polymer") of ethylene qualifying for classification as LDPE under sub-heading No. 3901.10 or 3901.20 depending on its density, for tariff purposes. From the literature we have already noted, it appears that methacrylic acid cannot, in any event, exceed 10% in Surlyn. Therefore, it is clear that, in any event, polyethylene would be the predominant monomer in Surlyn. In that case, applying the opening clause of Statutory Note 4 to Chapter 39, Surlyn would be classifiable under the heading appropriate to polyethylene.
14. So far as LDPE is concerned, there is no doubt that it falls under Heading No. 39.01, sub-heading 3901.10 since its density is, according to the record, 0.922. Surlyn would also fall under the same heading 39.01 sub-heading 3901.10 as LDPE would fall, in the present instance, for the reasons already stated.
15. The question then would be under which sub-heading of heading 39.01 the subject consignment which is a mixture of LDPE and Surlyn would fall. In this connection, the Collector has invoked Section 19 of the Customs Act, 1962 which, to the extent relevant, is reproduced below: "19. Determination of duty where goods consists of articles liable to different rates of duty. - Except as otherwise provided in any law for the time being in force, where goods consist of a set of articles, duty shall be calculated as follows : (b) articles liable to duty with reference to value shall, if they are liable to duty at the same rate, be chargeable to duty at that rate, and if they are liable to duty at different rates, be liable to duty at the highest of such rates:" It should be noted that the provision applies to goods consisting of a set of articles. While the term "set" has not been defined, it is not a difficult term to understand. According to The Concise Oxford Dictionary', it means inter alia a number of things or persons that belong together as essentially similar or as complementary to each other, group, collection. The examples given are : set of studs, chairs, stamps, novels, golf-clubs, lectures etc. For the present purpose, however, these examples would not serve the purpose because a set of chairs of studs would conceivably attract the same rate of duty.
The classic example which comes to mind is a set consisting of a fountain pen and a pencil. These are complementary to one another and are similar in function. In any event, without further discussing the meaning of the expression 'set of articles', we note that Section 19 of the Customs Act comes into play only if any law for the time being in force does not provide otherwise for determination of duty in such circumstances. The Customs Tariff has its own rules of interpretation.
If these rules provide guidelines for classification of the goods in the instant case, then, the rules would prevail and Section 19 of the Customs Act would not be applicable. Rule 2 (b) of the Statutory Rules for the interpretation of the Customs Tariff Schedule reads as follows : "2.(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substance. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3." In the present case, LDPE is mixed with Surlyn. The product is a mixture of LDPE and Surlyn. We have noted that LDPE and Surlyn, both, fall under sub-heading 3901.10.
16. If it is assumed that Rule 2(b) is not applicable, we have the guidance of Rule 3 which reads as follows : "3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description.
However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration." In the present case, Rule 3(b) would, in our opinion, be the more appropriate application, since, on test, the goods have been found to consist of a mixture of LDPE and Surlyn. In the present case, the LDPE component of the mixture, being the predominant constituent, gives the mixture its essential character. The subject goods would, therefore, be classifiable under sub-heading 3901.10.
17. The appellants have declared the goods on the bills of entry exactly as they have been described in the import documents. It-appears that the fact that the goods were wet and contaminated with foreign particles came to light only after the bills of entry were filed. Even otherwise, the conduct of the appellants in taking up the matter without delay with the suppliers, in having the goods surveyed by three agencies and filing a suit in a United States District Court against the suppliers for supply of goods not conforming to the import documents - all this shows, in our view, not mala fide conduct of a person with intent to defraud the customs. The declaration in the bills of entry being on the same lines as the description of the goods in the import documents, the appellants cannot, in our view, be held to have misdeclared the goods even though, as it turned out, the goods were not strictly according to the import documents. We hold that the charge under section 111 (m) of the Customs Act has not been proved.
18. Turning to the question whether the import licence covered the goods, para 100(1) of the Hand Book of Procedures for Imports & Exports Promotion, April 1988 to March 1991, relied upon by the Collector reads thus :- " ... in terms of the Imports (Control) Order, 1955 dated 7th December,. 1955 (as amended), it is a condition of every licence that the goods for import of which the licence is granted shall be new goods, other than disposal goods, unless otherwise stated in the licence. Disposal goods even if new will not be treated as new goods." The Collector has considered the following circumstances and concluded that the goods are "disposal" goods - (i) The goods were not packed in original manufacturers' bags but in paper bags without indication of the nature of the goods, type/grade, quantity, suppliers and manufacturers' name etc.
(ii) The goods are not of similar (homogenous ?) type but a mixture of types of polyethylene viz., discoloured material and that even according to the appellants the goods are not prime type i.e., prime virgin material.
(iii) Contemporaneous price of L.D .P.E. was higher than the unit price of U.S. Dollars 805 per M.T. c.i.f. Kandla declared for the present goods.
19. Taking up (iii) above first, it is seen that the Collector has not adduced any evidence in support of the higher price of L.D.P.E. That apart, he himself has stated that there is no need to cite contemporaneous prices since the declared assessable value was not being questioned but they were only to derive a conclusion about the nature of the goods (i.e. disposal, not prime, goods). In our view, the Collector's stand is strange and wholly untenable. If he seeks to rely, as we suppose he is entitled to, on the price factor as an evidence to show that the goods were 'disposal' goods, then, surely, it is for the Revenue to adduce tangible evidence in support of the allegation. It will not do to say that it is for the importer to show that these are not disposal goods, seeing that they are not prime material.
20. Shri Srinivasan has relied on the Bombay High Court's judgment in Abdul Husein Mohammedally Master v. Union of India and Ors. [1981 ELT 936 (Bom.)], followed by the Tribunal in Collector of Customs, Cochin and Ors. v. Rajan Universal Exports (Mfrs.) Pvt. Ltd. and Ors. [1985 (21) ELT 207 (Tri.)] in support of his submission that the present goods are not 'disposal' goods. These are not second-hand goods though they be contaminated goods, not strictly conforming to Dupont's specifications for L.D.P.E. Shri Sunder Rajan, however, points out that the goods in the case before the Bombay High Court were brand new goods, though remaining in stock for long. The decision has no application. In the case before the Tribunal (supra), the goods were stock lots. The age of the goods cannot determine whether they are 'disposal' goods. This decision, again, has no application. In the present case, the goods were contaminated, had sweepings etc. They are not new goods. Further, they were not in original packings of the manufacturers. They are, therefore, disposal goods.
21. The term "disposal goods" has not been defined in the Hand Book of Procedures for Imports & Exports Promotion, April 1988 to March 1991.
Para 100 (1) merely says that it is a condition of every licence that the goods for import of which the licence is granted shall be new goods, other than disposal goods, unless otherwise stated in the licence. Further, it says that disposal goods, even if new, will not be treated as new goods. It is thus clear that the newness or otherwise is an irrelevant factor.
22. The nature of-packing of the goods, relied on by the Collector, could conceivably be an indicator but, without other corroborative evidence, cannot lead to the definitive conclusion that the goods are "disposal" goods.
23. The same consideration holds good for the second circumstance relied on by the Collector. Contaminated or off-specification goods need not, again, necessarily be "disposal goods".
24. What, in our opinion, could be definitive is the real nature of the transaction. That is to say, whether the goods were offered for sale, and bought as, "disposal" goods or even if not so, is there evidence to show that the goods were in fact disposal goods. One can conceive of several circumstances in which a manufacturer or stockist may want to dispose of goods as "disposal" goods. One could be that the goods are somewhat defective. Another could be that the goods are such that they are no longer in vogue. Yet another could be that they are contaminated or off-specification. In all these situations, the price at which the goods are sold would be a strong corroborative piece of evidence. We have already seen that the Revenue has not adduced any evidence of the price factor in support of its stand. In the present instance, we have noted the order for the goods and related import documents. The goods ordered, viz. LDPE, natural virgin, were contracted for at U.S. Dollars 805 per M. Tonne. The invoice shows the same rate though the goods supplied turned out to be not exactly conforming to the order. The Surveyors' reports have been noted earlier. They bear out that the material supplied does not conform to the order specifications. Two of these reports infer that the goods were packed in the same condition as was shown to them since the bags did not show any external damage. On percentage examination, the goods were found to be wet/discoloured/admixed with foreign materials. The appellants have filed in the U.S. District Court, New York, a suit against the suppliers. These circumstances point to the strong probability of the appellants having been landed with a supply of goods, not conforming to their order, whether such supply was inadvertent or deliberate. The circumstances noted by the Collector do not, in our opinion, add up to the strong probability that the goods are "disposal" goods.
25. In the case of Rajan Universal Exports 1985 (21) ELT 207 (Tri.) - the goods were ball roller and taper roller bearings of Russian origin, shipped as per the company's suppliers in Japan from Australia where they were lying for over seven years, they having been originally packed in Russia between 1968 and 1972. The order was concluded on the basis of two "stock lists" sent by the Japanese suppliers. The lists referred to various taper bearings with their code number, the individual quantity available for sale being in odd numbers (and not multiples often or of dozens and the like). However, the prices quoted were per piece. The minimum order acceptable was said to be U.S.dollars 3000. The Collector of Customs, Cochin held that the goods were "disposal" goods which term would cover 'stock lots' or 'job lots' even if the lots were factory fresh or used goods. The Counsel for the appellants had relied on Bombay High Court's judgment in the case of Abdul Husein Mohammedally Master (supra) in support of his stand that the goods were not "disposal" goods. In the case before the High Court, the goods were of a mixed variety and were purchased in a lot. The High Court observed: "The expression 'disposal goods' occurring in sub-clause (3)(iii) of clause 5 of Import (Control) Order must be read in the context of expression 'new goods' used in the same clause. The expression, 'disposal goods' is used as 'contra distinction to new goods'. Once it is found that the goods are imported are new, then the mere fact that they are not of uniform type and size is not sufficient to warrant the conclusion that they are 'disposal goods'. Shri Hidayatullah is right in his submission that the three authorities did not even challenge the facts that every item imported was new and unused. The authorities below proceeded on a wrong assumption that as the petitioners have purchased the goods in lot and goods are not of uniform type and size, they are to be treated 'disposal goods'. The assumption is unwarranted and contrary to the plain reading of sub-clause 3(iii) of clause 5 of the Import (Control) Order. The orders under challenge in these circumstances cannot be sustained and the order of confiscation requires to be set aside." In the case before the Tribunal, Revenue had contended that the prices of the goods therein were 40% lower than for new goods but led no evidence. In the result, the Tribunal held that it had not been established that the goods were 'disposal' goods.
26. In the instant case, the Department has not established that the goods are 'disposal' goods. All circumstances point to the strong probability of supply of goods not conforming to the order. It is not the Revenue's case that the goods are not new or that they are used. No doubt, they were found to be wet, contaminated etc. But that would not necessarily mean that they were 'disposal' goods.
27. In the result, we hold that the charge that the goods were "disposal" goods, not covered by the import licence, has not been established.
28. In the above view of the matter, the order of the Collector cannot be sustained. It is accordingly set aside and the appeal is allowed with consequential relief to the appellants.