| SooperKanoon Citation | sooperkanoon.com/6989 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Sep-01-1993 |
| Reported in | (1996)(82)ELT65TriDel |
| Appellant | Eastman Industries |
| Respondent | Collector of Customs |
2. The appellants had imported certain goods, namely, (i) Base and Beam and (ii) Blades declaring them as spares of Mitutoyo Brand instruments (Vernier Gauge and Combination set) in the relevant Bill of Entry dated 19-1- 1988. The clearance of the said goods was sought against their Additional Licence bearing No. 3082653, dated 8-10-1986 in terms of provisions of para 265(6) of AM 1985-88 Policy Book. According to the department the imported items are not actually spares but are complete instruments in themselves and/or not covered against the said licence.
Since Vernier Height Gauge of measuring rule are specifically mentioned against the serial No. 23 of Part-A ol Appendix 8 and serial No. Ill of Appendix 2 Part-B of AM 1988-89 Policy. The Additional Collector who adjudicated the proceedings observed that since the goods were not covered by valid licence and, accordingly, ordered for confiscation of goods under Section lll(d) of the Customs Act, 1962 read with Section 3 of the Import & Export (Control) Act, 1947 and/or Section 11 of the Customs Act, 1962. However, he gave an option to redeem the goods on payment of redemption fine of Rs. 1,80,000/-. In addition to this, personal penalty of Rs. 25,000/- was also imposed under Section 112 of the Customs Act. Aggrieved by this order, the appellants have come before us by way of this appeal.
3. We have heard Shri S.D. Nankani, learned Advocate, for the appellants and Shri S.K. Sharma, learned T.D.R., for the Revenue.
4. The contention of the appellants is that they had imported parts/components of the Vernier Height Gauge and not the complete Vernier Height Gauge. Complete Vernier Height Gauge consists of several parts /components including (i) Beam, (ii) Base, (iii) Scriber, (iv) Holder and Clamp & (v) Lens Assembly. Scale Sliding Device is one of the parts of the Vernier Height Gauge and it is incorrect to say base and beam as complete Vernier Height Gauge. Even if the imported items are assembled together, they neither constitute a complete Vernier Height Gauge nor imported items are capable of any independent function. Hence, they are not hit by the description in "Vernier Height Gauge" given at serial No. 23 of Appendix-8, Part-A of AM 1985-88 Policy Book.
5. As regards the blades, it was submitted that the same are also parts of combination square sets and they are not measuring rules falling under serial No. Ill of Appendix-2, Part-B of AM 1985-88 Policy Book.
In support of this contention, Sri Nankani relied upon the catalogue of M/s. Mitutoyo, the manufacturers/suppliers of the goods in question.
Further, it was said that the value of the two blades also would establish that these blades are not measuring rules which are ordinarily used. It was argued that the goods in question which require more components to constitute a complete Vernier Height Gauge and/or complete combination set cannot be considered as complete instruments by themselves. He said that the goods in question are completely covered by the definition of 'Spare' given in para 7(11) of AM 1985-88 Policy Book and drew our attention to the relevant para which reads as under :- "7.(11) "Spare" means a part of sub-assembly or assembly for substitution, i.e., ready to replace an identical/similar part or sub-assembly or assembly, if it becames faulty or worn out, and includes an accessory (or attachment) in the same regard".
Sri Nankani attacked the finding of the Additional Collector wherein he has referred to the percentage of value of the said goods to determine complete Vernier Height Gauge. He said that this was neither a ground in the Show Cause Notice nor can be the criterion to determine the product as full. Further he said when once the said goods valued at 80% of the complete Vernier Height Gauge, at any rate it cannot be considered as complete Vernier Height Gauge.
6. It was submitted that the Additional Collector erred in making reference to Rule 2(a) of the Interpretative Rules of Schedule to the Customs Tariff Act, 1975. These rules are applicable only for the purpose of classification under CTA and same have no application for describing the entries in the Import Policy. He said that in any event the goods in question cannot be said to have acquired essential character of a complete Vernier Height Gauge because without the scriber the accuracy/precision cannot be obtained.
Shri Nankani said that Deputy Collector had accepted similar goods as Spares against identical licences of Export House in the case of M/s.
Siemens India Ltd., and though this case was brought to the notice of the Additional Collector but this was not dealt with in the impugned order. Further he said that it was reliably learnt that subsequent to passing of the impugned order the very Additional Collector had allowed clearances of similar goods against identical import licence by giving particulars of references and requested the respondent be directed to produce copy of the orders to ascertain the truth. He submitted that there is no case for imposition of fine and penalties so long as the goods are found to be in conformity with the declared description, viz., part of instruments. Further he said that there is absolutely no case for imposing personal penalty under Section 112 of the Customs Act as there was neither an allegation nor there is a finding regarding deliberate defiance of law.
7. During the course of arguments as well as in the written submissions filed by the D.R. while countering the arguments, it was explained that the Vernier Height Gauge is an instrument itself used for measuring the height of different objects and components of parts. It mainly consists of (i) Base Block, (ii) Main Scale which is attached to the Base and (iii) Vernier Scale, which slide over main scale and other option accessories namely (i) Scriber, (ii) holders and clamp for scriber and (iii) Lens assembly.
The Vernier Height Gauge without the above said accessories is complete itself and can perform its function of measuring the height even without the above said accessories. Though this has been indicated as machine with proper base and Beam, the complete set assembly containing base, main scale and vernier scale can be used to measure the height and as such is a complete instrument itself. The scriber and holder and clamp for scriber which are accessories are used only when marking at a particular height is to be done on the work piece or the object.
Whereas the lens assembly helps the user in reading the vernier scale easily but the same can be read even without use of lens assembly.
Hence these option assemblies are just to facilitate the user to work efficiently but these cannot be said to be essential component parts.
While justifying the imported item as complete instrument he referred to the relevant portion of the impugned order wherein it has been indicated that on examination of the sample it was found that it was vernier height gauge complete and was consisted of base, beam and the scale, sliding device, which is nothing but the vernier scale, which helps in measuring the height to great accuracy. He also referred to Page D-10 of the Catalogue of Mitutoya measuring instrument wherein it was noticed that goods were with or without scriber and also carbide tip scriber has been shown in D-12 of the Catalogue as height gauge accessories. He said that since the lens assembly, scriber, holder and clamp were shown as accessories and the imported goods are by themselves complete vernier height gauge and it cannot be considered as spare parts. Relying upon the definition of spare parts given in para 7 of A.M. 1985-88 Policy Book, he said spare parts can only those which requires replacement after some use as a result of wear and tear before the use. Hence complete instrument cannot be considered to be a spare part. He justified the application of Rule 2A of the Rules of Interpretation in determining the goods by fulfilling the essential character of the complete or finished goods.
8. As regards blades, it was submitted that it is nothing but a fundamental liner scale, which is graduated on both the ends/edges and is used for measuring distance within its permissible limits and is correctly covered under Sr. No. 111 of the Appendix 2 Part B of AM 1985-88 Policy as measuring rules. He said that the value of the goods is immaterial and the value is not the criterion to decide the nature of the commodity when it is actually the measuring rule.
He produced copies of the Order-in-original in the following cases which were referred by the appellant's counsel :-CUSTOMS FILE PARTY'S NAME & ADD. B/E NO./T.NO.NOS & DT----------------------------------------------------------------------------S/10-121/22-7-1988 M/s. B.N. Nobis & Co., T. No. 5314/14-1-1988 14, Old Court House, B/E No. 124/16, dated St. Calcutta-1.
19-1-1988 Vsl. Maritsa Skinitis.S/10-122/22-7-1988 -do- T. No. 5041, dated 14-1- 1988S/10-123/22-7-1988 M/s. Gausia Exports Ent.
T. No. 5535/14-1-1988 133, Hazi Syed Street, B/E No. 124/19, dated Bombay-400 003.
19-1-1988 Vsl.: Maritse Skinitis.S/10-81/88 6(A), M/s. Siemens India Ltd., B/E No. 11676 Fy. Dated27-5-1988 134-A, Dr. Annie Besant 5-1-1988 S.S. Maritsa Road, Worli, Bombay-18.
Skinitis._ He said that in all these cases it has been ordered for confiscation of goods but lenient view has been taken in imposition of fine and penalty, in view of the past practice of allowing items as spare parts of instruments. He said that, however, the Tribunal is not bound by these decisions.
9. We have considered the arguments advanced on both sides and perused the records. The point to be considered in this case is whether the imported goods viz., "Base and Bream" & "Blades" are spare parts as claimed by the appellants or complete instruments by themselves as held by the Department.
10. Percentage of value of the imported goods may not be the criterion to determine whether it is a Vernier Height Gauge or not. But what is to be considered is if the imported items viz., Beam and Base are assembled together whether it can be called as Vernier Height Gauge and is capable of independent function as Vernier Height Gauge even in the absence of other parts, viz., Scriber, Holder and clamp and lens assembly. In other words whether the remaining three parts are essential parts of the Vernier Height Gauge or mere accessories. The Dictionary meaning of term 'Vernier' as per McGraw Hill Dictionary, 2nd Edition is as follows :- "Vernier (F.NG) A short, auxiliary scale which slides along the main instrument scale to permit accurate fractional reading of the least main division of the main scale".
As can be seen from the records that the party had imported Base & Beams declaring as spare parts for Vernier Height Gauge, but actually imported alongwith Scale Sliding Device. The contention of the party is that scale sliding device is one of the parts of Vernier Height Gauge and the remaining parts are required to make complete Vernier Height Gauge. The imported items, viz., Base, Beam and the Scale, Sliding device is nothing but Vernier Scale which helps in measuring the Height to great accuracy even to the extent of fraction of the smallest division of the main scale in Millimeter or inch as the case may be depending upon the least count of Vernier height gauge as rightly argued by the D.R. Page D-10 of the Catalogue of Mitutoya Measuring Instrument No. E-50 supports this view as it was described as Vernier Height Gauge series 514, 520 with Scale Sliding Device. Carbide tipped scriber on page D-12 of the above catalogue is an accessory of Vernier height gauge. Lens Assembly is also an accessory since it helps in reading the scale clearly. Under these circumstances, we hold that imported items are not spares but they themselves constitute Vernier Height Gauge.
11. As regards second item, viz., Blades, we are unable to agree with the arguments of the appellants' counsel that it is a part of combination square set and cannot be used as measuring rule and it is too highly [period] [sic] to be used as a measuring scale/rule. Value of the goods is not the decisive factor to decide the commodity in question and on going through the diagram and relevant literature, we feel that Additional Collector is correct in holding that this is only a measuirng scale/rule. In the view, we have taken, we hold that Additional Collector was justified in holding that the imported items are not spares and are not covered by valid licence. The first item imported by the appellants as Vernier Height Gauge is covered by Serial No. 23 of Appendix-8 Part A of ITC Policy for AM-1985-88 and blade covered under serial No. Ill of Appendix 2B of the same Policy and both require specific import licence for their clearance. But as regards imposition of redemption fine we feel some lenient view is called for.
It was brought to our notice that similar goods are being regularly imported at different places in India and in some cases have been treated as spares both for the purpose of assessment as also for the purpose of release against the Additional licenses issued to Export House like in the present case within the meaning of para 268(6) of 1985-88 Policy and in other cases lenient view has been taken in imposing redemption fine without levying any personal penalty. We too feel that redemption fine is on higher side and, accordingly, it is reduced to Rs. 50,000/- as against Rs. 1,80,000/-. Further we hold that there is no case for imposition of personal penalty in the present case and, accordingly, we set aside the penalty of Rs. 25,000/-.
13. With due respects to my learned brother Hon'ble Member (Judicial) Shri G.A. Brahma Deva, my views and orders are as follows :- 14. I observed that a perusal of the Bill of Entry (No. 008392, dated 17-2-1988) shows that the goods have been described therein as "SPARES OF MITUTOYO BRAND/INSTRUMENTS (Vernier height gauge, combination set)".
15. The bank attested invoice, dated 27-11-1987 contains the same description on the main sheet and the details as per attached sheet(s) show the goods as follows :-___________________________________________________________________CODE NO. DESCRIPTION OF GOODS___________________________________________________________________SPARE PARTS FOR VERNIER HEIGHT GAUGE : 16. The show cause notice, dated 17-8-1988 mentions inter alia that "on perusal of samples on 1st check examination procedure, item (I) is found to be vernier height gauge with scale sliding device..." "Also by importing complete instruments and declaring them as parts of instruments, duty evasion is [suspected] to be sought".
17. The licence No. 3082653, dated 8-10-1986 was produced before Customs and the clearance was sought with reference to the validity of additional licences for import of spares in terms of paragraph 265(6) read with the definition of spares in the ITC and para 7(ii) (TN 85-88).
18. In the CAS form enclosed with the appeal the appellant have indicated "ITC" in column 8. They had filed the appeal before WRB is stating, inter alia, that 'the issue involved in the captioned appeal relates to ITC i.e. the validity of licence resulting in imposition of redemption fine and penalty'; and they got it transferred to NRB vide their application dated 6-6-1989 in terms of CEGAT Order 1/87 and the matter was fixed before NRB in view of the WRB order transferring the case to the Bench.
19. At the same time in the appeal memo the appellants have referred, inter alia, to the classification dispute flowing from the allegations regarding correctness of declaration and the order-in-original also deals with classification aspects as well. In spite of it, again, it is the ITC aspect in respect of which the prayer has been made before WRB as well as this Bench after filing of the appeal.
20. During the hearing before this Bench also, the debate centred almost wholly on the question as to whether the goods imported were parts, which could be allowed under the licence produced or a complete instrument for whose importation the licence was not valid in view of the fact that the vernier height gauge falls under SI. No. 23 of Appendix 8 of 1985-88 Policy, and the corresponding pleas in respect of the blade. In other words both the sides have confined themselves to ITC aspect during the oral hearing as well as the written submission and submitted to the jurisdiction of the Regional Benches.
21. Noting this, I proceed to examine the matter on merits and find that the imported goods which have been declared in the bill of entry as spare parts of instruments cover three (and only three) items as per the invoice namely, However, the examination report referred to in the show cause notice and the order-in-original shows that on Customs examination it was found that the consignment actually consists of This shows that no declaration was made in respect of the scale sliding device found in the consignment.
22. In the appeal memo as well as during the submission before us it was stressed by the learned counsel that the [basic] issue is as to whether the base and beam by themselves constitute a complete vernier height gauge or whether these items are merely parts of instruments as declared by these and the departmental representative has tried to contradict this contention.
23. I have perused the catalogue and the drawings and diagrams filed by the respondent. The catalogue shows a number of models and the description of parts of these models.
24. The learned counsel has emphasised with reference this material that a complete vernier height gauge consists various parts including 25. It is evident from the material produced before us that base and beam by themselves do not constitute a complete vernier height gauge and to this extent (and this extently) the appellants are right.
26. The department, is however right in treating the items (iii), (iv) and (v) as accessories in view of the definition and the catalogue and other material filed by the appellants themselves which treat the scriber, holder and clamp for scriber and [lense] assembly, differently from the base, beam and the sliding device and evidently the last three constitute a complete instrument, and other parts are required for enhancing the accuracy or efficiency etc. and are optional. In fact the second edition of the McGraw Hill dictionary describes vernier as "A short, auxiliary accurate fractional reading of the least main division of the main scale".
All this shows that a complete vernier height gauge consists of three essential parts, As all these three parts have been imported in the same consignment therefore it is apparent that what the appellants have imported is a complete instrument and the fact that they have not imported other (optional) parts or accessories does not make any difference to this fact and legal consequences thereof. The department, right from the examination of goods and adjudication by the Collector to the learned DR have noted the presence of the sliding scale but have not been able to realise to the full extent, the significance of its presence in the consignment. It is however of prime importance that it is the vernier scale sliding along the beam (alongwith the base) which gives the instrument its most essential character and makes it a complete vernier height gauge instrument.
27. It is also significant that while the importers have not challenged the physical examination at any stage, they have simply tried to explain it away by saying that scale sliding device being one of the parts of the instruments and the description in the bill of entry being parts of instruments, their declaration was correct. But it is here that they have erred inasmuch as the bill of entry has to be read with the documents produced. It is noteworthy that the invoice shows only the base and the beam as parts of the vernier height gauge but does not disclose that there was also scale sliding device in the consignment and this fact was discovered only as a result of physical examination by Customs. In other words this was a clear cut case of suppression of a material fact, and an incorrect incomplete declaration amounting to mis-declaration.
28. Since admittedly there was already a controversy regarding as to what constitutes a complete vernier height gauge and what could or could not be allowed to be cleared as parts of the instruments and the appellants were fully aware of it, as evident from their own submissions, the suppression of the fact of importation of scale sliding device and consequential mis-declaration was evidently deliberate.
29. Further the show cause notice read as whole reveals the charge of mis-declaration in respect of the number of items as well as the description of goods (although Sub-section has not been specifically mentioned). Moreover the notice clearly invokes Section 112 Customs Act with reference to this mis-declaration consequential evasion of duty and does not confine itself to the penalty for violation of the Import Trade Control Act and Policy only.
30. In fact I am surprised that these aspects were not highlighted from the department's side. The adjudication order, although it starts on the right track and refers to the above mis-declaration, somehow confines itself to Section lll (d) and Section 3 of the ITC in the operative portion and the penalty appears to have been imposed on this ground only, although, in view of the language of the show cause notice and the Collector's own finding of facts it was necessary that a decision on classification, valuation and duty aspect (including the revised duty chargeable) also was specifically recorded and duly incorporated in the operative portion of the order.
31. Be that as it may, since only the ITC aspect has been urged before us during the course of hearing I agree, for the reasons discussed above with my learned brother that the appellants had in fact imported a complete vernier height gauge and the importation was hit by Entry No. 23 of Appendix 8.1 also agree with my learned brother in upholding the learned Additional Collector's findings in respect of the items linear measurement scale described as blade for the combination set. As such I hold that the licence produced was not valid to cover the goods in question and the importation was consequentially unauthorised and the goods were liable to confiscation and the appellants were liable to penalty.
32. However, in so far as the quantum of penalty is concerned the plea of reduction or waiver does not find favour with me for the reasons discussed above. In this respect I would further like to emphasise that since the cases of importation of 'only spares' are distinguishable from the cases of importation of 'complete instruments' therefore the examples of previous clearance cited before us do not help the appellants. Even otherwise admittedly after allowing few cases the customs house started cautioning or imposing fine and the appellant had become aware of these developments. As such if there is anything, they were required to be more cautious; and should have filed a full, correct and complete declaration which they did not do.
33. In the above circumstances, I consider that there was no scope for any leniency and the fine and penalty imposed by the learned Collector was required to be confirmed.
34. In view of the difference of opinion, the matter is submitted to the Hon'ble President for reference to third Member on the following point: (1) whether in the facts and circumstances of the case the penalty imposed by the adjudicating authority was adequate and was required to be confirmed (as proposed by V.P.) or it was required to be reduced (as proposed by the Hon'ble Member (Judicial).
S.K. Bhatnagar) (G.A. Brahma Deva )Dated : 4-1-1992 Vice President Member (J) The point of difference is referred to Ms. Jyoti Balasundaram, Member (J).
"Whether in the facts and circumstances of the case, the fine and penalty imposed by the adjudicating authority were adequate and were required to be confirmed or they were required to be reduced." 36. The facts of the case have already been discussed by the Referring Bench and hence there is no need to repeat the same in detail. The brief facts sufficient for the purpose of resolving the difference are as follows : The appellants imported certain goods declaring them as spares of Mitutoyo Brand Instruments (Vernier Gauge and Combination set) and sought clearance against additional licence. The adjudicating authority held that the items were not spares but complete instruments in themselves, not covered against the licence and accordingly ordered confiscation under Section 111(d) of the Customs Act, 1962 with option to redeem the goods on payment of a fine of Rs. 1,80,000/- and imposed a penalty of Rs. 25,000/-. The finding was upheld by the Referring Bench. However, the learned Member (Judicial) has reduced the redemption fine to Rs. 50,000/- and set aside the penalty, taking a lenient view in the light of past practice of similar goods, while the learned Vice President upheld the fine and penalty in toto, on the ground of mis-declaration and distinguishing the cases of other imports as being those of imports of spares as distinct from the present case of import of complete instruments.
37. I have heard Shri S.D. Nankani, learned Counsel and Shri V.C.Bhartiya, learned DR, and carefully considered their submissions.
38. I find that the learned Counsel is correct in submitting that the previous contemporaneous clearances of identical goods viz. goods declared as spares by the importers but held by the Department to be complete instruments were allowed with caution to the importers. I have gone through the orders of the Assistant Collector in those cases and find that therein also the invoice goods had been described as spare parts for Vernier Height Gauge viz. base/Beam while on examination they were found to consist of Scale Sliding Device and Head Scale in addition to the declared description. Further, in the present case, there is no finding on the charge of mis-declaration and Section lll(m) has not been invoked by the adjudicating authority, and there is no cross-appeal by the Department. In this view of the matter, I agree with the finding of the learned Member (Judicial). The difference of opinion is resolved accordingly. File to be placed before the original Bench for further orders.
39. In view of the majority opinion fine is reduced to Rs. 50,000/- (Rupees fifty thousand only), but penalty is set aside.