Bifora Watch Company Vs. Collector of Customs - Court Judgment

Excerpt:
1. this appeal arises from the order-in-appeal dated 21-2-1991, passed by the collector (appeals), bangalore. by this order, the collector rejected the claim of benefit of notification no. 186/86 for the purpose of auxiliary duty. the appellants imported five consignments of capital machinery for the manufacture of mechanical and quarts analogue watches totally valued at rs. 3,10,49,582.00, under bills of entry nos.175/86,150/86,174/86,161/86 and 156/86. they were assessed to duty under heading 8579.81 read with customs notification nos. 45/85, 186/86, 55/86 at 10% basic plus 25% auxiliary duty. the goods were cleared on payment of duty. horological machines and testing equipments are exempted from basic customs duty as in excess of 10% of value.however, with effect from 1st march, 1986, the auxiliary duty applicable is 40% instead of 25% levied as there is no specific exemption notification in respect of auxiliary duty other than notification no. 186/86 by which all goods are leviable to 40% of the value. accordingly a demand notice was issued for the difference in duty amount totalling to rs. 46,57,443.60 in respect of all the five the consignments. the assistant collector after following the adjudication proceedings rejected the importers' claim for the benefit of customs notification no. 186/86 read with customs notification no.154/86 and confirmed the amounts demanded in the show cause notice. the importers pleaded before the collector that horological machines and testing equipments are exempted from basic customs duty as in excess of 10% of value in accordance with notification no. 45/86, dated 28-2-1985. for the purpose of levy of auxiliary duty, the assistant collector in his order, levied 25% in terms of the notification no.186/86, dated 1-3-1986. however, he realised that the rate of duty under this notification had been raised to 40% instead of 25% and accordingly, the differential duty had been demanded on this point. the appellants had contended that the goods had been classified under sub-heading 8479.81, but the more appropriate classification of the goods would be 8456 to 8465 cta, and as a consequence, benefit of notification no. 154/86 with effective rate of auxiliary duty would have to be taken into consideration instead of prevailing notification no. 188/86, dated 1-3-1986. it was pleaded by the appellants that as the goods are horological machines, they are entitled to basic duty under notification no. 45/85 and complete exemption from auxiliary duty in terms of notification no. 188/86. it was pleaded that the proviso to notification no. 154/86, dated 1-3-1986 laid down that "provided that nothing contained in this notification shall effect the exemption granted under any other notification of the government of india for the time being in force". hence it was pleaded that there is an alternate notification granting better benefit, the same cannot be denied to them. the learned collector on consideration held that the appellants had opted for the benefit of notification no. 45/85, dated 28-2-1985 and hence would have to pay auxiliary duty. he has held that once they had opted for the benefit of notification no. 45/85, therefore, the appellants cannot take the benefit of notification 154/86 for the purpose of auxiliary duty, which grants benefit for different items under different tariff headings. he held that the notification no.186/86 gives complete exemption from auxiliary duty in respect of those goods which are partially or wholly exempted from the duty of customs specified in the first schedule to the customs tariff act by virtue of the notification of government of india in the ministry of finance or in the department of revenue and banking specified in the schedule. the schedule lists out a large number of notifications. one of the notifications mentioned at sl. no. 263 in the table is 154/86, dated 1-3-1986. notification no. 45/85 does not figure in the entire schedule to the notification. therefore, as they opted for the concessional rate of duty exemption under notification no. 45/85, the auxiliary duty to be levied would be only in accordance with notification no. 186/86, dated 1-3-1986 where the rate specified is 40%, and therefore, the plea for granting the benefit of notification no. 188/86, dated 1-3-1986 has no merits and that plea should fail. the collector has held that the only way the appellants can get the benefit of notification no. 186/86 is when they decide to opt for a concessional rate of assessment under notification no. 154/86 and not otherwise, as they did not wish to avail this notification because it would not be beneficial to them as the rate of duty is higher than what is available under notification no. 45/85. therefore, the order of the assistant collector is correct in law and on that reasoning rejected the appellants' plea.2. it is contended by the senior advocate, shri g. chander kumar that the reasoning arrived at by the collector is unsustainable, as when there is another notification granting lower benefit which is advantageous to the importer, the same cannot be denied as has been held in the tribunal's judgment as in the case of indian oil corporation ltd. v. collector of central excise, as reported in 1991 (53) e.l.t. 347. he also relied on the judgment rendered in the case of singh alloys & steel ltd. v. collector of central excise, as reported in 1991 (56) e.l.t. 782 and also that of collector of customs v. bharat heavy electricals limited as reported in 1987 (29) e.l.t. 163. he pointed out to proviso to the notification no. 154/86, dated 1-3-1986, which clearly stated that nothing contained in this notification shall effect the exemption granted under any other notification, as the benefit was also available under notification no. 188/86, dated 1-3-1986. therefore, the benefit cannot be denied. the learned counsel pointed out to the bills of entry by which the goods had all been classified under heading 8479.81, granted the benefit of basic duty under notification no. 45/85 (as amended) read with notification no.186/86 and notification no. 55/86. although these goods had all been classified under this sub-heading, it is contended that as far as the auxiliary duty is concerned, the classification is required to be adopted in terms of notification no. 154/86 which is a specified notification in terms of sl. no. 42 of notification no. 188/86, which grants the benefit from auxiliary duty in respect of the specified notifications in the schedule of the said notification. the learned advocate on perusal of the notification no. 154/86, dated 1-3-1986 referred to several items which are included therein. he fairly pointed out that the item specified therein would be exempted from grant of duty provided they fall under 84.56, 84.57, 84.58, 84.59, 84.60, 84.61, 84.62, 84.63 and 84.65 of the first schedule to the customs tariff act, 1975. it is his submission that although so far as the classification for basic duty has been adopted under headings 8479.81, yet they are required to be separately classified under different headings on merits for auxiliary duty is concerned for granting the benefit of notification no. 154/86-cus., dated 1-3-1986.3. the learned dr submits that the claim of the appellants is totally mis-conceived. he submitted that the question of classification had been finalised in the bill of entry in respect of entire machinery having been imported and declared as "capital machinery" and on their further declaration as "horological machines and testing equipments for manufacture of mechanical and quarts analogue watches under heading 8479.81" and claiming the benefit of customs notification no. 45/85. it is his submission that this classification having not been challenged, the same cannot be re-classified under a different heading on individual machine basis to fall under headings 8464 to 8465 of the customs tariff act for the purpose of auxiliary duty. he submits that they had not challenged the classification and in terms of the assessment made in the bill of entry, the auxiliary duty applicable is 40%, which has been demanded in the present case. initially the assistant collector had short levied the duty and on discovery demanded the duty in terms of the notification applicable to the goods as per the declaration adopted by the importers in the bill of entry itself.he submits that the appellants had imported large number of machineries but their claim for benefit of setting up for manufacture of watches was accepted and therefore, the question of individual classification would not arise as they have not submitted catalogue of individual machines for examination. he further pointed out that there are 16 headings and 117 sub-headings under headings 8456 to 8465 (as specified in the claimed notification) re-classification under each tariff headings cannot be done, as the goods had left the customs charge.further there is no claim from their side for revising the classification. he relied on the hon'ble supreme court's judgment rendered in the case of all india glass manufacturers' federation v.collector of customs, as reported in 1991 (55) e.l.t. 5, wherein it has been held that once the goods had left the customs charge, the question of re-classification of the same would not arise, particularly when the goods were not subjected to examination.4. we have carefully considered the submissions made by both the sides and have perused the impugned order. the assessee had imported the entire goods for initial setting up of their assembly line for manufacture of mechanical and quarts analogue watches. there is a specific heading for classifying all the sets of machines under one heading in case of a plant for initial setting up for assembly and manufacture of goods. hence for that purpose the entire lot of machineries instead of being classified on merits were classified under heading 84.79 as "machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter". in terms of notification no. 155/86, dated 1-3-1986 the benefit which is available for initial setting up or for manufacture of assembly of goods mentioned in the schedule of the said notification was granted to the appellants, as they had satisfied the other requirements of the notification. as can be seen from the appellants declaration in the bill of entry, the appellants have not furnished a complete list of the various machineries which was imported in several containers, and these containers were not examined nor such individual machines assessed on merits, as the importer had described the goods as 'capital machinery for initial setting up for assembly and manufacture of watches'. in terms of these assessment, the auxiliary duty as specified in notification no. 188/86 which levies auxiliary duty at 40% of the value was rightly applied. therefore, the department having calculated only 25% duty, short levied demand for the balance was raised and confirmed.the assessee at this stage of recovery proceeding on short levy have stated that they are entitled for the benefit of notification no.188/86, dated 1-3-1986, which lists 270 notifications and specifies the total exemption from auxiliary duty provided the goods fall in the specified notifications. sl. no. 42 specifies notification no.154-cus., dated 1-3-1988. notification no. 154-cus., dated 1-3-1988 specifies the goods falling under headings 84.56 to 84.65 and each of the descriptions of the goods, namely, machineries, have been mentioned in the table. in the table, there are 85 sl. nos. describing various machines and their functions and type of machines. item (ii) of the notification also specifies about 29 sl. no's with description of various machine. therefore, it follows that only those machineries which are specified in these notification and which are classifiable under the said sub-heading alone would be eligible for the benefit of full exemption of the auxiliary duty. in the present case, the appellants have not filed the list of entire machinery imported by them, but have only mentioned the containers nos. in the bills of entry and have taken the benefit of notification 45/85 (as amended) which grants benefit to capital goods which are imported for initial setting up for the assembly or manufacture of goods mentioned in the schedule of the notification. the assessee having chosen to get the goods classified as capital goods for initial setting up as "machines and mechanical appliances having individual functions under heading 84.79", cannot chose to ask for a different classification, for the purpose of auxiliary duty without subjecting the individual machines for individual assessment on merits. the importer has also not furnished the entire catalogues, invoices, details of machineries, its manufacturing process and various other details required for such assessment on merits. the appellants have also chosen to get the consignment valued at capital goods for the purpose of valuation and they had not given valuation of individual items imported for assessment on merits. the total exemption for auxiliary duty is only for specified machineries under specified chapter headings in the notification no. 154/86-cus., dated 1-3-1986. for such claim, individual list of the machinery was required to be declared and all the relevant documents furnished, which the importers have failed to do so, obviously, because they chose to get a better relief meant for capital goods. however, for such relief, there is no benefit of auxiliary duty available to them.5. the counsel pointed out to the proviso to the notification 154/86, dated 1-3-1986 which states "nothing contained in this notification shall effect the exemption granted under any other notification" and submitted that the first the customs should individually assessed the goods under various headings in respect of individual machines for grant of auxiliary duty and thereafter take up the assessment for capital goods. this proposition is totally mis-conceived and without any basis. the assessment is done on the basis of declaration made by the appellants and they chose to get the benefit available for initial setting up of a plant as capital goods, and they having chosen not to file the invoice, individual catalogues of individual machines and details of each machinery imported by them, they, therefore, cannot urge that for the purpose of auxiliary duty, the department should have grant them the benefit by re-assessing the goods. as assessment have not been done on merits in respect of imported capital goods, therefore, the question of each machinery to be assessed under that heading and for grant of auxiliary duty does not arise. the judgments cited by the learned counsel, refers to the cases, where the classification had not been disputed fixed and on such classification of goods there were two benefits available under two different notifications and in such a circumstance, the .tribunal held that the benefit of both the notifications would be available. the goods having been assessed under the particular heading 8479.81 and whatever benefit available has been granted, therefore, individual assessment without declaration, furnishing of catalogue, assessment, examination of goods cannot be done. this view is supported by the ratio of hon'ble supreme court rendered in the case of all india glass manufacturers, which is directly applicable to the facts of this case. hence, their rejection of the claim by the lower authorities is totally justified. there is no merit in this appeal. hence we reject this appeal.

Judgment:
1. This appeal arises from the Order-in-Appeal dated 21-2-1991, passed by the Collector (Appeals), Bangalore. By this order, the Collector rejected the claim of benefit of Notification No. 186/86 for the purpose of Auxiliary duty. The appellants imported five consignments of capital machinery for the manufacture of mechanical and quarts analogue watches totally valued at Rs. 3,10,49,582.00, under Bills of Entry Nos.

175/86,150/86,174/86,161/86 and 156/86. They were assessed to duty under Heading 8579.81 read with Customs Notification Nos. 45/85, 186/86, 55/86 at 10% basic plus 25% Auxiliary duty. The goods were cleared on payment of duty. Horological machines and testing equipments are exempted from basic Customs duty as in excess of 10% of value.

However, with effect from 1st March, 1986, the Auxiliary duty applicable is 40% instead of 25% levied as there is no specific exemption Notification in respect of auxiliary duty other than Notification No. 186/86 by which all goods are leviable to 40% of the value. Accordingly a demand notice was issued for the difference in duty amount totalling to Rs. 46,57,443.60 in respect of all the five the consignments. The Assistant Collector after following the adjudication proceedings rejected the importers' claim for the benefit of Customs Notification No. 186/86 read with Customs Notification No.154/86 and confirmed the amounts demanded in the show cause notice. The importers pleaded before the Collector that Horological machines and testing equipments are exempted from basic Customs duty as in excess of 10% of value in accordance with Notification No. 45/86, dated 28-2-1985. For the purpose of levy of auxiliary duty, the Assistant Collector in his order, levied 25% in terms of the Notification No.186/86, dated 1-3-1986. However, he realised that the rate of duty under this Notification had been raised to 40% instead of 25% and accordingly, the differential duty had been demanded on this point. The appellants had contended that the goods had been classified under sub-heading 8479.81, but the more appropriate classification of the goods would be 8456 to 8465 CTA, and as a consequence, benefit of Notification No. 154/86 with effective rate of auxiliary duty would have to be taken into consideration instead of prevailing Notification No. 188/86, dated 1-3-1986. It was pleaded by the appellants that as the goods are Horological machines, they are entitled to basic duty under Notification No. 45/85 and complete exemption from auxiliary duty in terms of Notification No. 188/86. It was pleaded that the proviso to Notification No. 154/86, dated 1-3-1986 laid down that "provided that nothing contained in this notification shall effect the exemption granted under any other notification of the Government of India for the time being in force". Hence it was pleaded that there is an alternate Notification granting better benefit, the same cannot be denied to them. The Learned Collector on consideration held that the appellants had opted for the benefit of Notification No. 45/85, dated 28-2-1985 and hence would have to pay auxiliary duty. He has held that once they had opted for the benefit of Notification No. 45/85, therefore, the appellants cannot take the benefit of Notification 154/86 for the purpose of auxiliary duty, which grants benefit for different items under different tariff headings. He held that the Notification No.186/86 gives complete exemption from auxiliary duty in respect of those goods which are partially or wholly exempted from the duty of Customs specified in the First Schedule to the Customs Tariff Act by virtue of the Notification of Government of India in the Ministry of Finance or in the Department of Revenue and Banking specified in the Schedule. The Schedule lists out a large number of Notifications. One of the Notifications mentioned at Sl. No. 263 in the Table is 154/86, dated 1-3-1986. Notification No. 45/85 does not figure in the entire Schedule to the Notification. Therefore, as they opted for the concessional rate of duty exemption under Notification No. 45/85, the Auxiliary duty to be levied would be only in accordance with Notification No. 186/86, dated 1-3-1986 where the rate specified is 40%, and therefore, the plea for granting the benefit of Notification No. 188/86, dated 1-3-1986 has no merits and that plea should fail. The Collector has held that the only way the appellants can get the benefit of Notification No. 186/86 is when they decide to opt for a concessional rate of assessment under Notification No. 154/86 and not otherwise, as they did not wish to avail this Notification because it would not be beneficial to them as the rate of duty is higher than what is available under Notification No. 45/85. Therefore, the order of the Assistant Collector is correct in law and on that reasoning rejected the appellants' plea.

2. It is contended by the Senior Advocate, Shri G. Chander Kumar that the reasoning arrived at by the Collector is unsustainable, as when there is another Notification granting lower benefit which is advantageous to the importer, the same cannot be denied as has been held in the Tribunal's judgment as in the case of Indian Oil Corporation Ltd. v. Collector of Central Excise, as reported in 1991 (53) E.L.T. 347. He also relied on the judgment rendered in the case of Singh Alloys & Steel Ltd. v. Collector of Central Excise, as reported in 1991 (56) E.L.T. 782 and also that of Collector of Customs v. Bharat Heavy Electricals Limited as reported in 1987 (29) E.L.T. 163. He pointed out to proviso to the Notification No. 154/86, dated 1-3-1986, which clearly stated that nothing contained in this notification shall effect the exemption granted under any other notification, as the benefit was also available under Notification No. 188/86, dated 1-3-1986. Therefore, the benefit cannot be denied. The learned Counsel pointed out to the Bills of Entry by which the goods had all been classified under Heading 8479.81, granted the benefit of basic duty under Notification No. 45/85 (as amended) read with Notification No.186/86 and Notification No. 55/86. Although these goods had all been classified under this sub-heading, it is contended that as far as the auxiliary duty is concerned, the classification is required to be adopted in terms of Notification No. 154/86 which is a specified Notification in terms of Sl. No. 42 of Notification No. 188/86, which grants the benefit from auxiliary duty in respect of the specified Notifications in the Schedule of the said Notification. The learned Advocate on perusal of the Notification No. 154/86, dated 1-3-1986 referred to several items which are included therein. He fairly pointed out that the item specified therein would be exempted from grant of duty provided they fall under 84.56, 84.57, 84.58, 84.59, 84.60, 84.61, 84.62, 84.63 and 84.65 of the First Schedule to the Customs Tariff Act, 1975. It is his submission that although so far as the classification for basic duty has been adopted under Headings 8479.81, yet they are required to be separately classified under different headings on merits for auxiliary duty is concerned for granting the benefit of Notification No. 154/86-Cus., dated 1-3-1986.

3. The learned DR submits that the claim of the appellants is totally mis-conceived. He submitted that the question of classification had been finalised in the Bill of Entry in respect of entire machinery having been imported and declared as "capital machinery" and on their further declaration as "Horological machines and testing equipments for manufacture of mechanical and quarts analogue watches under Heading 8479.81" and claiming the benefit of Customs Notification No. 45/85. It is his submission that this classification having not been challenged, the same cannot be re-classified under a different heading on individual machine basis to fall under Headings 8464 to 8465 of the Customs Tariff Act for the purpose of auxiliary duty. He submits that they had not challenged the classification and in terms of the assessment made in the Bill of Entry, the auxiliary duty applicable is 40%, which has been demanded in the present case. Initially the Assistant Collector had short levied the duty and on discovery demanded the duty in terms of the Notification applicable to the goods as per the declaration adopted by the importers in the Bill of Entry itself.

He submits that the appellants had imported large number of machineries but their claim for benefit of setting up for manufacture of watches was accepted and therefore, the question of individual classification would not arise as they have not submitted catalogue of individual machines for examination. He further pointed out that there are 16 headings and 117 sub-headings under Headings 8456 to 8465 (as specified in the claimed Notification) re-classification under each tariff headings cannot be done, as the goods had left the customs charge.

Further there is no claim from their side for revising the classification. He relied on the Hon'ble Supreme Court's judgment rendered in the case of All India Glass Manufacturers' Federation v.Collector of Customs, as reported in 1991 (55) E.L.T. 5, wherein it has been held that once the goods had left the Customs charge, the question of re-classification of the same would not arise, particularly when the goods were not subjected to examination.

4. We have carefully considered the submissions made by both the sides and have perused the impugned order. The assessee had imported the entire goods for initial setting up of their assembly line for manufacture of mechanical and quarts analogue watches. There is a specific heading for classifying all the sets of machines under one heading in case of a plant for initial setting up for assembly and manufacture of goods. Hence for that purpose the entire lot of machineries instead of being classified on merits were classified under Heading 84.79 as "machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter". In terms of Notification No. 155/86, dated 1-3-1986 the benefit which is available for initial setting up or for manufacture of assembly of goods mentioned in the Schedule of the said Notification was granted to the appellants, as they had satisfied the other requirements of the Notification. As can be seen from the appellants declaration in the bill of entry, the appellants have not furnished a complete list of the various machineries which was imported in several containers, and these containers were not examined nor such individual machines assessed on merits, as the importer had described the goods as 'capital machinery for initial setting up for assembly and manufacture of watches'. In terms of these assessment, the auxiliary duty as specified in Notification No. 188/86 which levies auxiliary duty at 40% of the value was rightly applied. Therefore, the department having calculated only 25% duty, short levied demand for the balance was raised and confirmed.

The assessee at this stage of recovery proceeding on short levy have stated that they are entitled for the benefit of Notification No.188/86, dated 1-3-1986, which lists 270 Notifications and specifies the total exemption from auxiliary duty provided the goods fall in the specified Notifications. Sl. No. 42 specifies Notification No.154-Cus., dated 1-3-1988. Notification No. 154-Cus., dated 1-3-1988 specifies the goods falling under Headings 84.56 to 84.65 and each of the descriptions of the goods, namely, machineries, have been mentioned in the Table. In the Table, there are 85 Sl. Nos. describing various machines and their functions and type of machines. Item (ii) of the Notification also specifies about 29 Sl. No's with description of various machine. Therefore, it follows that only those machineries which are specified in these Notification and which are classifiable under the said sub-heading alone would be eligible for the benefit of full exemption of the auxiliary duty. In the present case, the appellants have not filed the list of entire machinery imported by them, but have only mentioned the containers nos. in the Bills of Entry and have taken the benefit of Notification 45/85 (as amended) which grants benefit to Capital goods which are imported for initial setting up for the assembly or manufacture of goods mentioned in the Schedule of the Notification. The assessee having chosen to get the goods classified as capital goods for initial setting up as "Machines and Mechanical appliances having individual functions under Heading 84.79", cannot chose to ask for a different classification, for the purpose of auxiliary duty without subjecting the individual machines for individual assessment on merits. The importer has also not furnished the entire catalogues, invoices, details of machineries, its manufacturing process and various other details required for such assessment on merits. The appellants have also chosen to get the consignment valued at capital goods for the purpose of valuation and they had not given valuation of individual items imported for assessment on merits. The total exemption for auxiliary duty is only for specified machineries under specified Chapter headings in the Notification No. 154/86-Cus., dated 1-3-1986. For such claim, individual list of the machinery was required to be declared and all the relevant documents furnished, which the importers have failed to do so, obviously, because they chose to get a better relief meant for capital goods. However, for such relief, there is no benefit of auxiliary duty available to them.

5. The Counsel pointed out to the proviso to the Notification 154/86, dated 1-3-1986 which states "nothing contained in this notification shall effect the exemption granted under any other notification" and submitted that the first the customs should individually assessed the goods under various headings in respect of individual machines for grant of auxiliary duty and thereafter take up the assessment for capital goods. This proposition is totally mis-conceived and without any basis. The assessment is done on the basis of declaration made by the appellants and they chose to get the benefit available for initial setting up of a plant as capital goods, and they having chosen not to file the invoice, individual catalogues of individual machines and details of each machinery imported by them, they, therefore, cannot urge that for the purpose of auxiliary duty, the department should have grant them the benefit by re-assessing the goods. As assessment have not been done on merits in respect of imported capital goods, therefore, the question of each machinery to be assessed under that heading and for grant of auxiliary duty does not arise. The judgments cited by the learned Counsel, refers to the cases, where the classification had not been disputed fixed and on such classification of goods there were two benefits available under two different Notifications and in such a circumstance, the .Tribunal held that the benefit of both the Notifications would be available. The goods having been assessed under the particular heading 8479.81 and whatever benefit available has been granted, therefore, individual assessment without declaration, furnishing of catalogue, assessment, examination of goods cannot be done. This view is supported by the ratio of Hon'ble Supreme Court rendered in the case of All India Glass Manufacturers, which is directly applicable to the facts of this case. Hence, their rejection of the claim by the lower authorities is totally justified. There is no merit in this appeal. Hence we reject this appeal.