Full Judgment
2. Appeals. The above appeals, and 6 other appeals filed by M/s. Sanwah Micro Systems (P) Ltd. and Sevak Ayat Niryat Co. Ltd., relate to import of Fax machines against additional licences issued to Export Houses/Trading Houses. The adjudicating authorities under the respective impugned orders confiscated the goods and levied redemption fine in addition to penalty as per details given hereunder :------------------------------------------------------------------------Name of appellant & Adjudicating Authority Redemp- PenaltyA. Nos.
and dt. of order tion fine------------------------------------------------------------------------M/s. Agro Impex Collector of Customs, 25,00,000 12,00,000C/264/91 & C/41 to MadrasM/s. M.B. Impex Addl. Collector of 3,84,368 75,000C/345/90 Customs, Madras After having heard the learned Counsel in extenso and the learned SDR for the Department and after going through the entire records and perusal of the relevant policy and the licences etc., since we feel that the appeals of these two appellants will have to be dealt with separately by reason of the specific endorsement in the licences deleting clause numbers (i) to (iii) endorsed on the back of the licences which exclusionary clauses would render the other conditions inapplicable in terms of para 215 of the relevant policy 1988-91 and 1990-93 we record a separate order in respect of these two appellants are concerned. In respect of the other four appeals i.e. C/434/90, C/38 to C/40/94 [Sanwah Micro Systems (P) Ltd.] and C/602/90 (Sevak Ayat Niryat Co. Ltd.) since the licences issued to these appellants do not carry the exclusion clause as in the case of appellants M/s. Agro Impex and M/s. MB Impex, we record in those appeals a separate order. Since the arguments advanced in all the cases were more or less same and overlapping, we record all the pleas made in the above appeals.
3. Appellant M/s. MB Impex (Appeal No. C/345/90) has filed the appeal against the order of the Additional Collector of Customs, Madras dated 11-5-1990 confiscating 50 sets of FAX machines imported and allowed redemption of the same on payment of a fine of Rs. 3,84,000/- besides a penalty of Rs. 75,000/- under the provisions of the Customs Act, 1962, the Act for short. Appellants M/s. Agro Impex have filed the appeals against the order of the Collector of Customs, Madras dated 8-1-1991 levying a fine of Rs. 25,00,000/- in lieu of confiscation of 200 Fax machines besides a penalty of Rs. 12,00,000 /-under the Act.
Confiscation of the goods has been done for the reason that under the licences the goods which are allowed for import are those which are covered under para 215 of the ITC Policy of the respective periods i.e.
1988-91 and 1990-93 subject to conditions and restrictions laid down thereunder and that fax machines cannot be taken to be covered under the said para as these are office machines which are restricted for import under para 118(7) of the import policy. After preliminary scrutiny of the paper book filed before us by each appellant, it is found that all the licences produced before us are in the nature of additional licences and the description of the goods as set out in Sl.
No. 3 of the licences was more or less same. We find in the case the licences produced by M/s. Agro Impex and MB Impex the licences bear additional endorsement to the effect that the conditions 1 to 3 on the reverse of the licences stood deleted. These conditions 1 to 3 are reproduced below : (i) This licence shall be subject to the conditions in force relating to the goods covered by the licence as described in the relevant Import Trade Control Policy Book, or any amendment thereof made upto and including the date of issue of the licence, unless otherwise specified.
(ii) This licence shall be suject to the conditions applicable to the class of importer concerned as contained in the relevant Import Trade Control Policy Book arid the Hand Book of Import.
(iii) This licence shall be subject to the conditions contained in Clause 5, sub-clauses (2) and (3) of the Import (Control) Order, 1955 dated 7th December, 1955 as amended upto and including the date of issue of licence, unless otherwise specified.
In the case of the other importers this endorsement regarding deletion of the conditions as above was not there and it was felt that this may have an important bearing on the question of validity of the licences for import of the Fax machines. Arguments in respect of these cases were heard first and the learned Counsel Shri Kasturi Rangan argued the matter on behalf of these two appellants. Common arguments were however made on behalf of other appellants by M/s. Thiagarajan and JC Patel, Advocates along with Shri K.C. Mankani, Advocate. We, therefore, propose to take up the case of appellants M/s. MB Impex and M/s. Agro Impex in Appeal Nos. C/345/90/MAS and C/264/91 for decision separately.
4. The learned Counsel for the appellants pleaded that Fax machines had been imported by these two importers against additional licences which were covered by policy for the year 1988-91 and 1990-93. The import against the additional licences, he pleaded, was governed by para 215 of the Import Policy and the said para for purpose of convenience is reproduced below : "215(1). The Export Houses/Trading Houses will be eligible to Additional Licences on the basis of the admissible exports made in the preceding licensing year. The value of these licences will be calculated at 10% of the NFE earnings on the total eligible exports made in the preceding licensing year. This percentage shall be 12% in cases where an Export Trading House is able to achieve a minimum growth of 10% in terms of NFE realisation in the previous year, over and above the year preceding the same. The NFE earnings for this purpose, would have the same meaning as defined in the Note below para 212(2)(a) above." In this connection he drew our attention to para 215(4) of the Import Policy which for convenience of reference is reproduced below : "(4) Additional licences issued to Export Houses will also be valid for the import of the following items upto 10 per cent (upto 15 per cent in the case of Trading Houses) of the value of the licence for : (i) Import of technical designs, drawings and other technical documentation for the value of not exceeding Rs. 10 lakhs in the case of Export Houses, and Rs. 25 lakhs in the case of Trading Houses; (ii) Import of items appearing in Appendices 3 Part-A, 3 Part-B and 5 Part-A subject to the following conditions : (a) that the c.i.f. value of a 'single item' shall not exceed 10% of the flexibility in value terms or Rs. 10 lakhs, whichever is less; (b) where the value for import of a 'single item' on the basis of 10% as at (a) above, works out to less than Rupees one lakh, import would be permitted upto a value of Rs. 1 lakh, provided it is within the overall flexibility allowed on the licence; and (iii) Import of non-OGL capital goods (other than those appearing in Appendices 1 Part-A and 8) without indigenous clearance, subject to the same conditions as stipulated at (ii) above, within the overall flexibility allowed to Export/Trading Houses." He pleaded that there is no dispute as to the fulfilment of the other conditions in para 215 in terms of the above provisions. The dispute, he pleaded, relates only to the scope of the term import of 'non-OGL capital goods'. He pleaded that Fax machines, no doubt are office machines, but these are capital goods capable of use in the office. He pleaded that even the learned Collector in his order impugned in Appeal No. C/345/90 has nowhere stated that these are not capital goods and non-OGL variety. He pleaded that the Collector has merely gone on to hold against the appellants' importation based on his reading of the policy and he has sought to read the provisions of para 118 in para 215(4)(iii). He pleaded that no doubt, in para 118, the policy in regard to Fax machines has been set out but this policy is only with reference to importation of goods by REP licence holders and cannot be made applicable to the case of additional licence holders. He pleaded that REP licence and additional licence granted to the Export House belong to two separate categories and the policy in respect of each is separately laid down in the import and export policy. He pleaded that the conditions applicable to each category of licence should be interpreted in the context of the conditions set out in the paras dealing with that category of licence and there is no scope for reading para 118 in para 215(4)(iii). He pleaded that para 215(4)(iii) of the import policy clearly sets out that importation of the non-OGL capital goods is permissible. He pleaded that as it is, in the order-in-original impugned in Appeal No. C/264/90 by Agro Impex the learned Adjudicating Authority has clearly stated that Fax machines are also capital goods falling under sub-category of capital goods for office use and his reasoning for not allowing the same under para 215 is as under : The importers have claimed that all along the Customs, CCI & E, DGTD and the Income Tax authorities held that the Fax machines are capital goods. In support of their claim the importers quoted the definition for capital goods in the ITC Policy which covers goods meant for rendering services also. No doubt the Fax machines render the services of communication the message from one place to another.
The ITC Policy also recognised the Fax machine under the category of Capital Goods, but as a Special category of Capital Goods for rendering services. That is the reason what it was stated under sub-para 118(7) of ITC AM 1988-91, as well as under sub-para 124(7) of ITC AM 1990-93 that the normal capital goods importation procedure is not applicable to the office machines. The Chief Controller of Imports and Exports in his letter REP Circular No. 24/89, dated 21-6-1989 addressed to all the licensing authorities and Customs authorities clarified that office machines cannot be allowed under the Non-OGL capital goods category against the flexibility permitted on REP and Additional licences. As per the provisions under para 28 of ITC AM 1990-1993, the opinion of the CCI & E is final in interpretation of the Import Policy. It is also well settled that contemporaneous construction placed by the administrative authorities or executive authorities charged with executing a statute would be relevant in construing a statutory provision. The Supreme Court had occasion in the case of KP Varghese v. ITO, Ernakulam (reported in 1981 Tax L.R. 1448) to deal with a circular issued by the Central Board of Direct Taxes and held that the meaning ascribed by the very authority should be accepted as correct applying the principles of contempomnea ex-positio. The Supreme Court held that the Circulars of the Central Board were binding on the lower authorities and were in the nature of contemporanea expositio furnishing legitimate aid in construction.
The rule of construction by reference to contemporanea expositio is a well settled rule for interpreting a statute by reference to the expositions it has received from contemporary authority. Further, the provisions under sub-para 220(3)(iii) also makes dear that the office machines cannot be allowed against the Non-OGL capital goods category. Thus, the Fax machine is also a capital goods falling under the sub-category of capital goods for office use and hence cannot be allowed under the category of Non-OGL capital goods against flexibility provisions of Additional licences in view of the specific provisions, under sub-para 118(7) of ITC AM 1988-91 and sub-para 124(7) of ITC AM 1990-93. Such non-permissibility was also confirmed by the CCI & E in his letter cited (supra). Thus, the Fax machine is a capital goods for rendering service and cannot be allowed against the category of non-OGL capital goods in view of the specific provisions of the ITC Policy." He pleaded that the Collector in his order impugned in Appeal No.C/264/91 has dealt with extensively on various aspects of the case involved and apart from his findings as above, he has also referred to the relevant import policy applicable and has held that in both 1988-91 and 1990-93 policies in regard to office machines have been set out. He pleaded that the thrust of the Collector's argument is that in terms of para 118(7) of ITC Policy 1988-91 and para 124(7) of 1990-93 office machines cannot be imported under flexibility provisions and the capital goods procedure is not applicable for the importation of Fax machines. He also referred to various other paras in the policy to say that in respect of 1988-91 licences the transitional provisions under sub-para 224(1) & (2) of 1990-93 would apply even in respect of licences issued under 1988-91 policy unless irrevocable letter of Credit had been opened by 1-4-1990. He pleaded that Additional licences had been issued to the Export Houses and Trading Houses with a view to give fillip to exports and therefore the flexibility clause provided in the Additional licences would cover non-OGL capital goods. He pleaded that this degree of flexibility has been deliberately provided to make available the goods required for export easily. He pleaded that a reading of any other provisions of the policy under para 215 providing for flexibility for non-OGL capital goods in the relevant policy would be defeating the very purpose for which a separate policy for additional licence was provided for, for Export Houses and Trading Houses. He pleaded that notwithstanding the above, the case of the appellants is on a superior footing in view of the further endorsement made on the licences as mentioned earlier in regard to the deletion of conditions (i) to (iii) on the reverse of the licence. He pleaded that by virtue of the deletion of these conditions, the appellants would be governed only by the provisions as laid down under para 215 and any other conditions in the policy would not be applicable to the licensees. He pleaded that by virtue of deletion of the 1st condition which envisages that the licensee shall be subject to the conditions in force relating to the goods covered by the licence as described in the relevant ITC Policy or any amendment thereof made upto and including the date of issue of the licence, unless otherwise specified, the appellants' import is valid in law. He pleaded that even if the import of Fax machines is covered by the policy relating to import of such machines under para 118 under the relevant policy, the conditions would not be applicable in the case of the appellants inasmuch as, these conditions put the licence issued beyond the pale of the restrictions in the other paras and also the importation will have to be examined only with reference to para 215 of the policy as endorsed on the licence for the reason that the goods imported are non-OGL capital goods. He, therefore, pleaded that confiscation of the goods in the case of the appellants was not maintainable in law. He further referred to para 224(1) of the 1990-93 policy in regard to applicability of any ban in regard to import of office machines will not invalidate the endorsement in regard to deletion of the conditions (i) to (iii) above.
He pleaded that this deletion of the conditions has to be given a meaning and the Customs Authorities cannot introduce any conditions when the same have been rendered inapplicable.
5. Shri J.P. Gregory, the learned SDR for the Department pleaded that the Import and Export Policy sets out various restrictions and relaxations in it and all paras have to be read harmoniously so as to carry forward the purpose of the framers of the policy. Any relaxation has to be read in the context of any specific ban which may be there in respect of any specified items or group of items and the eligibility to import certain items will have to be decided after reading various paras of the policy in a harmonious manner. He pleaded that no doubt, under para 215 of the Import Policy, non-OGL capital goods were allowed and Fax machines which were basically for use in the office though considered capital goods can be imported only against those licences if they were not banned otherwise. He pleaded that admittedly under para 118 of the policy, there is a restriction for import of office machines for registered exporters and they can get only one machine. It has been clearly set out in this para that application for office machines would not be entertained against capital goods application as flexibility provisions would not apply to office machines. He pleaded that much has been sought to be made by the difference between Registered Exporters and Trading or Export Houses and he pointed out that in the definition of the Export and Import Policy, Registered Exporters have been defined as under: "Registered Exporter' means a person holding a valid Registration Certificate issued by an Export Promotion Council, Commodity Board or other registering authority designated by Government for the purpose of export promotion." " Export House/Trading House means a Registered Exporter holding a valid Export House/Trading House Certificate issued by the Chief Controller of Imports and Exports, New Delhi." He pleaded that it is clear that Export House and Trading Houses are also Registered Exporters and it cannot be the intention of the framers of the policy to give any undue advantage to the Export House or Trading House or in respect of holders of additional licences over and above what is permissible to Regisered Exporters. He pleaded that it can dearly be read from the policy that many categories of office machines were allowed for import both by Registered Exporters and additional licence holders in view of the specific provision under para 215 read with para 118 of the policy. He pleaded that East Regional Bench in their decision reported in 1992 (62) E.L.T. 781 have not gone into the facts and cannot be treated as a good law.
6. We observe that the short point that falls for consideration in the above appeals is whether the flexibility for import of non-OGL items permissible under Para 215 of the import policy would also cover within its ambit import of Fax machines which are in the nature of office machines and also what would be the implication of the deletion of certain conditions viz. conditions (i) to (iii) on the reverse of the licences as mentioned above, with reference to para 215 of the import policy. We observe that the appellants are holders of additional licence and they are permitted to import non-OGL capital goods in terms of para 215(4)(iii). The plea of the appellants is that import of non-OGL capital goods other than those covered under Appendix 1 Part A & B is permissible without any indigenous clearance and since there is no dispute that office machines do not figure under Appendix I Part A & B these machines being in the nature of capital goods though useful in the office is covered by the licences produced. We observe that various facilities which are made available to Export and Trading Houses are set out under para 214 of the Policy and under para 215 of the Policy under heading 'Additional Licences' the policy for the same has been set out and the relevant para is 215 (4) (iii) reproduced above. In this context it would be relevant to go into para 215(5) which is reproduced below for convenience of reference : "The Export/Trading Houses may also be permitted the clubbing of the flexibility allowed on Additional Licence as per sub-para (4) above, for the import of Non-OGL capital goods (other than those in Appendices i Part A & B) for import of a single integrated plant/machinery including accessories thereof, upto a c.i.f. value not exceeding Rs. 1 crore." It is seen that in this para (5) the facilities made under para 214(4) are referred to as flexibility allowed to additional licence holders.
Under Para 118(1), the policy prescribes for import of Office machines and this para figures under Chapter VIII which carries the heading 'Special Licensing Provisions'. This chapter deals with the policy for import of various specified items which are not covered under the general provisions and among these are permitted items such as Animals, Birds and Reptiles, plants, seeds, books etc. etc. and policy for office machines is amongst the many. Under para 118(1) specific provision has been made in the case of Registered Exporters upto the value of export exceeding Rs. 1 crores or more in the preceding years and Fax machines at Sl. 3 under the description Fascimile machine have been allowed for import once in two financial years. Further, under sub-para (20) of para 118 there is also policy regarding import of photocopying paper, calculating machine, paper rolls etc. etc. of value not exceeding Rs. 10,000/- in a licensing year by the Export Houses or Trading Houses and there is specific condition that import of machines and materials will be subject to actual user condition i.e. for use in the licence holder's off ice/factory. There is also provision for import of PBX/PABX by the Export and Trading Houses against additional licences on the recommendation of the Department of Tele-communication as mentioned in the Registered Export Policy, vide para 118(5).
Further, there is provision under para 118(6) for import by Government Departments, Research and Development Institutions and request for which from these organisations are to be considered on merits for issue of specific licences. Para 118(7) sets out the following : "Applications for import of office machines will not be entertained under the procedure for import of Capital goods. Import of office machines cannot also be made under flexibility provisions".
It is seen that this prohibition under sub-para (7) reproduced above is a general prohibition applicable to all cases where flexibility provisions are there for import against licences. It is seen that against Sl. No. 215(4) the facilities given have been termed as flexibility provisions. Under para 215(5) we see no reason as to why bar set out in para 118(7) of the policy cannot be read into the facility ' under para 215(4)(iii) reproduced above. The only contingency under which this condition will not apply would be when there is specific mention that the other conditions in the import policy will not apply to the licences in question. In the cases before us we find that the licences carried an endorsement deleting conditions (i) to (iii) endorsed on the back of the licences. By these conditions the licence is subject to conditions relating to the licence as prescribed under the relevant ITC policy. If these conditions had not been deleted what has to be read is that in respect of the goods which are covered by description at 91, (i) to (iii) of the licence, the relevant provisions given in the policy in respect of office machines would apply amongst other conditions applicable in terms of para 215 of the policy. By the deletion of these conditions, what remains is that the goods which can be imported are the items as can be taken to be covered within the ambit of the description under para 215 of the policy and when no other conditions can be read into the same. We, confess, it is not clear to us as to why the licensing authorities chose to delete these conditions. To us it appears one of the rare cases where this has been done. We, are not .called upon to pronounce on the endorsement made in regard to the deletion of the conditions (i) to (iii) on the back of the licences. We therefore, hold that but for this deletion of the conditions, the Fax machines could not have been imported against the licences produced. Inasmuch as these conditions (i) to (iii) have been deleted all the goods which are falling within the ambit of the Policy covered by Appendices 1 Part A and B can be imported and since Fax machines are non-OGL capital goods, the same can also be imported. The appeals of M/s. Agro Impex and M/s. M.B. Impex therefore have to be allowed with consequential relief and we order accordingly.