The
British Machinary Supplies Co. Vs. The Union
of India & Ors [1996] INSC 894 (6 August 1996)
Thomas
K.T. (J) Thomas K.T. (J) Bharucha S.P. (J) Thomas, J.
CITATION:
JT 1996 (7) 169 1996 SCALE (5)645
ACT:
HEAD NOTE:
This
appeal by special leave is in challenge of and order passed by the Government
of India, In exercise of their revisional power under the Customs Act, 1962
(for short 'the Act'). As per the impugned order Government annulled the order
passed by the appellate Collector of Customs in favour of the appellant on
6.12.1978.
Facts
are, in brief, these:
Appellant
firm ha a factory for manufacturing sewing machines and accessories at Faridabad,
with an approved capacity for making both domestic as well as industrial sewing
machines Appellant imports components for manufacturing such sewing machines
from foreign suppliers.
In
October, 1977, appellant imported components of industrial sewing machines -
"rotating hooks complete with bobbin case", some of which required
1/3 H.P. and the others required 1/2 H.P. for their operation. According to
appellant such imported components were dutiable at the rate of 40 per cent to
customs duty as per item 84.41(1) of the Customs duty in accordance with it.
But the Assistant Collector of Customs (Foreign Post), New Delhi charged higher duty by treating
those goods as components for domestic sewing machines as prescribed under
clause (2) of heading 84.2 of the Schedule. Appellant paid the higher duty
under protest and goods released and later applied for refund of the excess
amount paid (i.e. Rs.1,78,208/-). The Assistant Collector rejected the
application reiterating that the goods imported were components for domestic
sewing machines.
Appellant
then filed a statutory appeal before the Appellate Collector of Custom who
allowed the appeal holding that the goods imported were not for domestic sewing
machines and as such they were classifiable under item 84.41(1) of the
Schedule. Thus the appellant became entitled to refund of the amount paid in
excess. But appellant failed to get the refund applied for, inspite of pursuing
the applications filed for that purpose. So a writ petition was filed in the
High Court of Delhi for appropriate directions.
Notice
was served on the Central Government. They proposed to review the order for
which a notice was given to the appellant to show cause why it should not be
reviewed.
Appellant
submitted its detailed reply. Central Government after hearing the appellant
passed the impugned order.
Appellate
collector concurred with the importer's stand that the components were intended
for industrial sewing machines on the strength of a variety of reasons and on
its own satisfaction when the difference was demonstrated before him, during
the time of hearing. He noticed that " the rotating book in the industrial
machine had higher speed than the domestic sewing machine and if the rotation
pin of the industrial sewing machines were to be attached to the domestic
sewing machines, it would not withstand the speed and would break." Appellate
Collector, therefore. was convinced that the hooks imported by the appellant
were not for domestic sewing machines and were "solely" and
principally for use in machines operated with more than 1/4 H.P. and as such
are classifiable under ICT 84.41(1)".
Government
of India differed form the above conclusion,
mainly on the premises that
(1)
"the rotating hooks complete with bobbin case" find their use in
domestic as well as other sewing machines, but their principal use lies in
domestic sewing machines,
(2) the
term sewing machine should have been understood in the manner it is understood
in international market/trade for purposes of customs classification. and
(3) the
corresponding heading in the Brussels Tariff Nomenclature (BTN) covers tow
types of sewing machines, namely
(a) ordinary
sewing machines used in homes or by tailors or dress-makers etc..
(b) special
machines which can be used only for certain other kinds of sewing (as
enumerated therein).
Learned
counsel for the appellant contended that the Government of India have gone far
beyond its powers in interfering with a fact finding arrived at by the
Appellate Collector for which many extraneous materials were improperly used,
At any rate the view adopted by the Appellate Collector should have been
accepted as a reasonable conclusion on the facts. According to the counsel. Item
84.41 of the Customs Tariff Schedule, which was brought into force on 1.1.1977,
read thus;
"84.41
Sewing machines; furniture specially designed for sewing machines; sewing
machines needles;
(1)
Not elsewhere specified - 40% (2) Domestic sewing machines - 100%" If the
imported components were for domestic sewing machines then the Central
Government is right in insisting on the customs duty realised form the
appellant. The language in which the item in the schedule is couched indicates
that one category relates to a specific specie i.e. "domestic sewing
machines", and the other is a general category i.e. "not elsewhere
specified". Apparently the burden is on the revenue if they want to include
the imported materials within the specific category to substantiate that those
materials are such.
The
very licence granted to the appellant contains a description which cannot
normally be marginalised in reaching a conclusion on this disputed aspect. A
list of components to be imported during the licensing period is appended with
the licence. It starts with the description that the components are for
industrial sewing machines. The first item in that list is "rotating hooks
complete with bobbin case", which is the component involved in this case.
In the
letter of Credit, granted by the Foreign Exchange Branch of Syndicate Bank
under which the components were imported, the commodities are described as
components of industrial sewing machines. Learned counsel for the appellant
produced a letter dated 832.1977, which was addressed to the Collector of
Customs and Central Excise, New Delhi, by the Central Board of Excise and
Customs, copy of which had been forwarded to the subordinate officers. the
letter contains a reference to the minutes of the conference of Collectors of
Customs on tariff classification matters, held in November, 1976. in which the
Board of Central Excise and Customs agreed that "the ordinary sewing
machines used in the home or by tailors, dress-markers etc. to be worked by
manual labour or which require for their operation less than 1/4 H.P. may
continue to be considered as domestic sewing machines whereas industrial sewing
machines essentially designed for operation powered by motors of 1/4 H.P. or
more would fall outside the scope of term domestic sewing machines." Much
reliance is sought to be made on this circular. The only conclusion that can be
arrived at, if the said circular has any use, is that the imported materials in
this case are usable for industrial sewing machines.
Shri
Joseph Vellapally, learned senor counsel who argued for the respondents,
contended that classification as for tariff cannot be determined on the basis
of what the Collectors of Central Exercise & customs or even what the Board
of Central Excise and Customs would have thought about it because it is
legislative process and its interpretation should be in accordance with law, we
cannot overlook the said circular which is, at least, binding on the department
as they have made it known binding on the department as they have made it known
to all concerned that sewing machines covered by motors of 1/4 H.P. or more
would fall outside the scope of the terms "domestic sewing machines"
. It must be borne in mind that the heading concerned in the tariff i.e.
84.41
uses the expression "domestic sewing machines" and but all the other
sewing machines in the residuary category "not elsewhere specified".
When customs officials themselves have understood that sewing machines designed
for operation powered by motor of 1/4 H.P. or more would fall outside the scope
of domestic sewing machines, it would be inept to suggest that they should
adopt a different stand when mulcting the importer with duty unless there is a
judicial pronouncement on the matter.
Learned
counsel for the respondent invited our attention to a reference made in the
universal Encyclopedia of Machines to a (Vol.I) to the effect that the present
day domestic sewing machines is usually driven by an electric motor. Hence it
was contended that a particular horse power for the motor attached to the
machines may or may not be decisive of the question whether a component is
principally used for domestic sewing machines. True the horse power is not the
only factor to determine it.
Learned
counsel for the respondent invited out attention to a decision of this Court in
Nat Steel Equipment Private Ltd. vs. Collector of Central Excise, 1988 (34) ELT
8, where this Court was concerned with "domestic electrical
appliances" mentioned in explanation of tariff Item 33(c) which was in
force at the relevant time. Their Lordships referred to an earlier decision of
the Gujarat High Court in Viswa & Co, vs. State of Gujarat (17 STC 581) in
which Bhagwati, J. (as the learned Chief Justice then was) has observed that to
make an electrical appliance a domestic electric appliance "what is
necessary is that it must be of a kind which is generally used for household
word". But in this case there is no material to show that a sewing machine
fitted with the type of components imported by the appellant is generally used
in household work.
We
find that the observations made by the Special Bench of CEGAT in Para
Engineering Works, New Delhi vs. Collector of Customs, New Delhi, 1987 (27) ELT
668, as more appropriate to the facts of this case. A manufacturer, importing
some components of industrial sewing machines with a motor of 1/4 H.P. had to
approach the Special Bench as similar question was raised by the custom
officials. The Tribunal noted that each Bill of Entry pertaining to the import
in that case contained reference to the invoices which were properly co-related
with the bills. Those documents contain the description that the components
were for industrial sewing machines. Assessment made under a different item inspite
of such invoices was held to be unsustainable. The position in this case is
almost similar.
From
the above discussion we come to the conclusion that Government of India have
wrongly exercised revisional powers by interfering with the decision of the
appellate Collector. we, therefore, allow the appeal and set aside the impugned
order. There shall be no order as costs.
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