Ajit K. Sengupta, J.
1. In this application under Section 130(1) of the Customs Act, 1962, the following questions of law have been referred to this Court:
'1. Whether, on the facts and in the circumstances of the case and on a true interpretation of para 54B (iii) of the relevant Import Policy of 1978-79, each type and size of mechanical seal imported by the applicant should be treated to be a single item for the purpose of the said paragraph?
2. Whether, on the facts and in the circumstances of the case each type and size of mechanical seal imported by the applicant should be considered to be a different item and its import allowed accordingly if the value of each such item was within the limit of Rs. 50,000/- as laid down in para 54B(iii) of the relevant Import Policy of 1978-79?
3. Whether, on the facts and by reason of the definition of 'spares' appearing in the Import Policy, each mechanical seal imported by the applicant is to be treated as a separate item of spare and the limit of the value of Rs. 50,000/- as laid down in para 54B(iii) of the relevant Import Policy should be applicable on each such seal?
4. Whether, on the fact and in the circumstances of the case, two interpretations of para 54B(iii) of the relevant Import Policy were possible and that the interpretation which was more favourable to the applicant, should be applied and it be held that the import of the mechanical seals in question was legal and justified?
5. Whether, on a finding by the Appellate Tribunal that the applicant was the actual user of the mechanical seals and that there was no intention on the part of the applicant to infringe the Import Trade Control Regulations, any fine in lieu of confiscation (which is penal in nature) could or should have been imposed?
6. The Appellate Tribunal having discharged the applicant from the charge of violation of the Import Trade Control Regulations in respect of the subject consignment, whether following the ratio of the judgment in Hindustan Steel Limited case, reported in : [1972]83ITR26(SC) , the applicant can be made liable to pay the fine?'.
2. The facts leading to this reference are that the applicant imported mechanical seals, admittedly of different sizes and specifications, valued at Rs. 1,49,980/- and sought clearance thereof against the Import Licence No. 1439458 dated 27th January, 1979, issued for non-permissible spares as per para 54B(iii) of the Import Policy for the period 1978-79.
3. The Respondent, however, declined to allow clearance on the ground that as the applicant imported mechanical seals of a total value exceeding Rs. 50,000/- the importation was unauthorised. After a hearing afforded to the applicant, an Order-in-Adjudication was made confiscating the goods under Section 111(d)/111(m) of the Act and imposing a fine of Rs. 20,000/- in lieu of such confiscation to be paid within a month from the date thereof. The aforesaid order of adjudication was confirmed in appeal. A revision filed before the Govt. of India against the Order in appeal, was transferred to the Tribunal and heard as if it were an appeal pursuant to the provisions contained in Section 131B(2) of the Act.
4. It was contended before the Tribunal that:
(a) The applicant was an actual user. The goods imported were required for use in a pump in the explosive manufacturing unit and the seals are tailor-made and are not indigenously available.
(b) They were of different sizes and specifications and a seal of one specification cannot be used as a substitute for a seal of a different size and specification.
(c) On a construction of para 54B(ii) and (iii) along with the definition of the word 'spares' in sub-para 11 of para 5, it would appear that the whole lot of spares of different sizes and specifications cannot be taken as one unit for the purpose of reckoning their value; each category of seals will have to be separately assessed.
5. The Tribunal in its order, now the subject matter of reference, had dismissed the applicant's Revision Petition heard as an appeal, on the grounds inter alia, that:
' 'Mechanical Seals' originally a restricted item became a banned item altogether from 14th August, 1978 inasmuch as in the amended policy that became ineffective on that day, the relevant description in Item No. 424 of Appendix 5 of the Policy was altered so as to be confined and applicable to 'Oil Seals' only. An item for purpose of para 54B(iii) counts as a single one even if it is used in various sizes and specifications and in the Import Policy itself, the example of ball and roller bearing has been given and it is clarified that the same is to be treated as a single item. Consequently the mechanical seals of various sizes and types as different spares, cannot but be treated as a single item. If they are to be treated as different items, the provisions of sub-para (ii) of para 54B will be defeated.'
6. The short question which calls for determination is whether on a correct interpretation of para 54B(iii) of the Import Policy of 1978-79, each type and size of mechanical seal imported by the applicant should be treated to be a single item for the purpose of the said paragraph. Before us the contentions urged before the Tribunal have been reiterated.
7. To appreciate the contentions, it is necessary to extract the relevant provisions of the Import Policy. Para 54, which deals with Import Policy for spares, reads as follows:
'54BB. (i) They may apply for a licence for import of other (non-permissible) spares at the rate of one per cent of the c.i.f. value of all the imported plant, machinery and equipment and of 1/2 per cent of the purchase price of any indigenous plant, machinery and equipment having imported components, installed or in use by them as on 1st April, 1978.
(ii) Licenses for non-permissible spares will be issued with the general description 'Non-permissible spares required for maintenance of the Capital Goods installed or used by the licence holder, including spares of ancillary equipment, control and laboratory equipment and safety appliances.' The customs authorities will allow clearance of the imports on his furnishing a declaration that these imported non-permissible spares are required for maintenance of the Capital Goods installed or used by the Actual User in his factory/establishment/institution.
(iii) Imports made of a single non-permissible spare should not exceed Rs. 50,000/-. An item will, for this purpose, count as a single one, even if it is used in various sizes and specifications, e.g. ball and roller bearings, etc. will be treated as a single item only.'
8. It is also necessary to extract the definition of 'spares' in sub-para 11 of para 5 which reads as follows :
'Spare' means a part or sub-assembly for substitution, i.e. ready to replace an identical part of sub-assembly, if it becomes faulty or worn out, and includes an accessory (or attachment) in the same regard.'
9. In the light of the aforesaid definition, it is also necessary to refer to the description of 'spares' given in the invoice annexed to the bill of entry for the purpose of clearance of the goods.
--------------------------------------------------------------------------------Description Selling price to purchaserprice per Amount--------------------------------------------------------------------------------1. Case contg:Non-Permissible sparesSpares for Acid PumpSeal Fluoseal Mechanical Crane Packings Ltd.'sItem 1 20 Nos. Type 10-3/4' size (T10 QWIC-QIV) 0190/10/V/649 Mat Code : 21-690-330 87.34 1746.80Item 2 20 Nos. Type 10-7/8'-Pt. No. 0222/0010/U/649 Mat Code: 21-690-340 93.28 1865.60Item 3 10 Nos. Type 10-1' size (T10/QWICQ IV) 0254/10/V/640 Mat Code : 21-690-650 101.83 1018.30Item 4 20 Nos. Type 18-1.1/8' size (T10/QWICQ IV) 0 85/10/V/59) Mat Code : 109.60 2192.0021-690-355Item 5 10 Nos. type 10-l.1/2' size Pat No. 0381/...0/V/649(T10 QW ICQIV) MatCode: 21-690-380 133.65 1336.50CCA C/F 8159.20--------------------------------------------------------------------------------
10. In the context and setting of the aforesaid facts, we have to consider the contentions of the learned Counsel for the parties. The contention of Mr. Gupta learned Counsel for the applicant, is that such spares which have been imported in this case arc mechanical seals meant for replacement and have to be replaced one by one identical mechanical seal which has become defective. It is his contention that the expression used in 54B (iii) that 'an item will count a single one, even if it is used in various sizes and specifications' has to be understood in the context in which the expression 'spares' has been used. It is his contention that ball and roller bearings should not be equated with the mechanical 'oil seals' specially designed for acid pumps. Ball and roller bearings and similar items if imported in various sizes and specifications would be treated as a single item only but not where the item is a replacement of a part. Mr. Gupta has also contended that even assuming there was a violation, it was technical violation and the applicant did not have any intention whatsoever of contravening the provision of Import Policy.
11. On the other hand, the contention of the learned counsel for the Revenue is that para 54B(iii) is very clear and the mechanical seal of various sizes and/or types cannot be treated as different spares and if such construction is accepted the provision of sub-para (iii) will be defeated. He has also submitted that when there is a violation, the importer has to be penalised irrespective of the nature of the violation. The conduct of the assessee may be a factor in determining the quantum of penalty or fine, but it has nothing to do with the question of imposition of penalty or fine.
12. There is no dispute that the value of the applicant's licence was Rs. 181,675/- and the value of the imported goods was Rs. 1,49,980/-. It is not also in dispute that the crane mechanical seals imported by the applicant were of different sizes and one could not replace the other. Para 54B(iii) allowed importation of 'single non-permissible spares to the value of Rs. 50.000/- for each such single spare'. It would be evident that in the instant case, five different types of spares have been imported. The specification is different, size is different, code number is different and under each item as shown in the invoice, 10 to 20 pieces of each type of seal have been imported. It cannot be disputed that the mechanical seals of different sizes that were imported by the applicant were of different sizes and specifications and could not replace each other. These seals were precision tailor-made and not ordinary seals. Each such mechanical seal being of particular size and specification could be used only in corresponding size and specification in acid pumps. A spare means a part or the sub-assembly for substitution that is ready to replace an identical part or sub-assembly, if it becomes faulty or worn out. Each item imported by the applicant could replace an identical item inasmuch as admittedly these seals are precision tailor-made for proper fitting in acid pumps.
13. In our view, the import comes within the purview of the definition of spare as each item is a part or sub-assembly for substitution, that is ready to replace an identical part. AH the spares imported under each item would be taken as a single item. It has not been disputed that the value of each of the five items of spares, if taken separately would not exceed Rs. 50,000/-. The mechanical seals which are 'spares' imported by the applicant were of various sizes and specifications and could be used only in the sizes and specifications on the said pumps corresponding to the sizes and specifications of the mechanical seals. Each mechanical seal is precision tailor-made and being of a particular size and specification can be used only in corresponding size and specification on said pump. These are to be treated as a single and separate item for the purposes of para 54B(ii) of the relevant Import Policy of 1978-79.
14. It is no doubt true that there is no equity about a tax but in case of a reasonable doubt the construction most beneficial to the subject is to be adopted. If there are two interpretations possible, then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him.
15. In our view, on the facts and in the circumstances of this case and on a reasonable interpretation of para 54B(iii) read with the definition of 'spares' as contained in sub-para 11 of Para 5 of the Import Policy of 1978-79, each item of mechanical seal is a distinct item and the five separate items cannot be clubbed together to hold that all five items would count as a single unit.
16. Even assuming that the licencee violated the provision of the Import Policy, a further question then arises as to whether there is any deliberate contravention in this case. The applicant disclosed fully and truly the description of spares which have been imported. The applicant bona fide believed that each item, because of its type and specification and the purpose for which it was meant, would be treated as a single unit. In this context, it cannot be said that there was a deliberate violation in this case. The value of the goods imported was within the prescribed limit of the licence. The items were meant for use in the process of manufacture of the applicant. These seals were required to ensure safety in production of explosives, a highly combustible product. Each item was meant to replace an identical part. In our view, therefore, on these facts no penalty or fine ought to have been imposed.
17. For the reasons aforesaid, we answer question Nos. 1 to 4 in the affirmative.
18. In view of our finding that the import was valid and in accordance with law, it was not necessary for us to decide question Nos. 5 and 6. However, since the contentions have been raised and we have dealt with the contentions, for the reasons recorded hereinbefore, we answer the fifth and sixth questions in the negative.
19. There will be no order as to costs.
Shyamal Kumar Sen, J.
20. I agree.