Judgment:
1. This is an appeal against the order passed by the Collector of Customs (Appeals), New Delhi. The appellants arc engaged in the manufacture of various electronic goods including Audio Tape Recorders, Car Cassette Players and Combinations thereof with Radio. They are registered with the Directorate of Industries, NOIDA as a small scale unit for the manufacture of aforesaid items. They imported a consignment of 24,000 pieces Magnetic Heads from Hongkong and filed Bill of Entry No. 21512 dated 30.4.1986 claiming clearance of the goods under open general licence in terms of Appendix 6(1) of the Import Policy, 1985-88 as actual users. They also claimed the assessment of the goods at the concessional rate of duty in terms of Notification No.232/83-Cus dated 18.8.1983 on the strength of the certificate dated 27.4.1984 issued by the Directorate of Industries. In the order dated 27.4.1987 passed by the Deputy Collector, the imported magnetic heads were held as not covered by the open general licence in terms of Appendix 6(1) of the Import Polioy, 1985-88 and by Notification No.232/83 dated 18.8.1983 on the grounds that the appellants could not be deemed as actual users in respect of the imported goods which were components of Tape Decks. Besides holding that the imported magnetic heads were assessable to duty at the standard rate, the adjudicating authority ordered the confiscation of the goods under Section 111(d) of the Customs Act, 1962 and imposed penally on the appellants. Being aggrieved by the order passed by the Deputy Collector the appellants filed an appeal. By the impugned order the Collector of Customs (Appeals) rejected the appeal on the ground that the appellants were not carrying out any manufacturing activity since they had been importing only two items viz. Magnetic Sound Heads and D.C. Micrometers and they had not submitted any evidence to establish the procurement of other components required for their manufacturing programme.
2. On behalf of the appellants, the learned Advocate Shri J.S. Agarwal appeared before us. He stated that the imported magnetic heads were components of Tape Decks, which arc used by the appellants as parts of Audio Tape Recorders and Combination thereof with radios. He added that the quality of Magnetic Heads available locally not being satisfactory the appellants were buying the tape decks without the magnetic heads.
He further stated that the imported magnetic heads were being used by the appellants as parts of locally acquired tape decks which in turn were used as components of Tape recorders and other electronic equipments which the appellants were entitled to manufacture in terms of the Registration Certificate issued by the Director of Industries.
Shri Agarwal contended that the impugned order holding the imported goods as not covered by O.G.L. was not sustainable since components of components have also to be deemed as components. In support of his contention he placed reliance on the decision of Tribunal in the case of Audio Vision Electronics v. C.C. Madras wherein it was held that component of a machine has also to be treated as a component of that machine. He referred to the certificate at page 17 of the paper book wherein Magnetic Heads have been included in the list of components required by the appellants for the manufacture of Audio Tape Recorder, Car Cassette Players and Combination thereof Radio. He also referred the certificate dated 26.4.1984 issued by the Additional Director of Industries, NOIDA, LLP.in terms of the requirements of Notification Nos. 232/83 Customs and 233/83-Cus dated 18.3.1983 wherein Magnetic Head was listed as one of the items required by the appellants as actual users for the manufacture of Audio Tape Recorder and other electronic appliances. The learned Counsel argued that in view of the certificate issued by the competent authority and there being no requirement in the Import Policy that each and every component of any item manufactured by an actual user should be imported and sufficient evidence having been filed by the appellants to the effect that they had been acquiring Tape Decks without Magnetic Heads, the impugned order denying the benefit of the Open General Licence and also notification No. 232/83-Cus dated 18.3.1983 was not sustainable.
3. On behalf of the Revenue, the learned SDR Shri S.K. Roy stated that the import of magnetic heads being correctly held as not eligible for clearance under the Open General Licence or at the concessional rate of duty in terms of Notification No. 232/83 since the appellants are not actual users in respect of Tape Deck Mechanism in which they are used as components. He added that the Collector (Appeals) had referred to the Deputy Collector's finding that the appellants were importing only two components and they had failed to submit any details regarding their precise manufacturing activity and the parts purchased by them from the market.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the following question arises for consideration in this case: Whether it is permissible for a manufacturer registered with the concerned Director of Industries for the manufacture of Audio Tape Recorders and Car Cassette Players and Combination thereof with radio to import under the open general licence and at the concessional duty in terms of Notification No. 233/83-Cus dated 18.8.1983 Magnetic Heads which are used as component of Tape Deck Mechanism which in turn is used as component of Audio Tape Recorder? 5. It is seen from the certificate issued by the Area Development Officer, Directorate of Industries, NOIDA complex, the appellants are registered as manufactures for Audio Tape Recorders and Car Cassette Players and Combination of these items with Radio. Hence, in terms of the definition of "Actual User (Industrial)" in para 7(3) read with the provision of paragraph 80 of Import Policy AM' 1985-1988 the appellants were entitled to import under the Open General Licence all the components listed in Appendix 6(1) required for the production of the items for which they were registered with the Director of Industries provided they were not restricted or banned in terms of any other provision of the Policy. The appellants could have, therefore, imported Tape Deck Mechanism which is a sub-assembly under O.G.L. since it is used in the manufacture of Audio Tape Recorders. They, however, chose to import magnetic heads which are parts of Tape Deck Mechanism. The appellants' case is that in order to improve the quality of their product they were using the imported Magnetic Heads for fitment into incomplete Tape Decks without the Magnetic Head acquired by them locally without the Magnetic. It is seen that the Tape Deck Mechanism is a sub-assembly consisting of numerous parts and constitutes an important component of Audio Cassette Recorder. Hence Magnetic Heads which are used as components of Tape Deck Mechanism also become parts or components of Audio Cassette Recorders. It is seen that in case of Audio Vision Electronics v. Collector of Customs, Madras the Tribunal had held that there was nothing in the Import Policy to warrant the conclusion that only intermediate components of tape recorder and T.V. sets, etc. were intended to be imported under the Open General Licence and not the materials and components required for the making of immediate components, sub-assemblies etc. In this decision the Tribunal had further held that there was no restriction in the Open General Licence as regards the quantity of any of the permitted items to be imported by an actual user. Para 5 and 6 of the Tribunal's decision being relevant, are reproduced below: 5. The second objection of the lower authorities flies in the face of the stated objective of the import/export policy of the Government which is to expand production, create more employment in the country and ultimately reduce the out-go of foreign exchange from the country. This objective is achieved not by undertaking a screw driver technology but by starting with the basic materials and components so that the miximum value addition takes place within the country. We find nothing in the import policy to warrant the conclusion that only immediate components of tape recorder and T.V. sets etc. were intended to be imported and not the materials and component required for making the immediate components, sub-assemblies etc. It is a settled position in law and fact that the component of a component of the machine is also a component of the machine. We find that an earlier three Member Bench of the Tribunal took a similar view in their order dated 24.10.1985 passed in appeal Nos. CD(SB) 2575/83-C and CD (SB) 2576/83-C of Oriental Importers and Exporters, Gwalior and Amar Knitting Works Pvt. Lid. Gwalior respectively v. Collector of Customs, Bombay.
6. As regards the third objection of the lower authorities, the appellants have placed drawings of their end-products before us to show that whereas the lower authorities calculated the requirements of RF/IF coils pat 7 per gadget, the actual requirements varied from 11 to 21. That apart, we find no restriction in the Open General Licence as to how much quantity of the permitted items should be imported by an Actual User. In the circumstances, the lower authorities were not justified in interpolating a restriction of their own into the import policy. Imported goods cannot be confiscated on the assumption that the Actual User Importer would most likely sell them in the market. If he docs sell them in the market, there are provisions in the Imports and Exports (Control) Act and the Import Control Order to take action against the errant importer. The jurisdiction to do so vests in the Chief Controller of Imports and Exports, it being a post-importation violation, and not with the customs.
6. On the ratio of the Tribunal's decision quoted above 1987 (13) ECR 269 (Cegat SB-B2) we hold that the appellants being registered with the Director of Industries for the manufacture of various electronic equipments including Audio Recorders 2nd Car Cassette Players were Actual users of the imported Magnetic Heads and were therefore, entitled to import them under the 'Open General Licence'. For this reason and also having regard to the fact concerned Additional Director of Industries had certified that the appellants were eligible for the concessional rate of duty on 'Magnetic Heads' in terms of Notification No. 232/83-Cus dated 18.8.1983 we hold that the, appellants were also eligible for the concessional rate of duty in respect of the 'Magnetic Heads' in question in terms of the said Notification.
7. In view of the foregoing, we set aside the impugned order and allow the appeal with consequential relief to the appellants.