of Customs, Bombay Vs. Shibani Engineering Systems
 INSC 897 (6
S.P. (J) Bharucha S.P. (J) Thomas K.T. (J) Bharucha. J.
JT 1996 (7) 222 1996 SCALE (5)593
6TH DAY OF AUGUST, 1996 Present:
Mr.Justice S.P.Bharucha Hon'ble Mr.justice K.T.Thomas D.Tandon and P.Parmeswaran,
Advs. for the appellant L.R.Singh, Adv. for the Respondent
following Judgment of the Court was delivered:
of Customs, Bombay V. Shibani Engineering Systems. Bombay
respondents imported two consignments of cups which are parts of taper roller
bearings. They filled bills of entry for clearance classifying the goods under
entry 8482.99 of the Customs Tariff Act, 1975, and claimed the benefit of the concessional
rate of duty provided by an Exemption Notification (No.70/89).
relevant part of the Exemption Notification reads thus:
Parts of goods covered by Sl.No. 5 above namely (a) Cups and Cones of roller The
rate of bearings covered by duty applicable items (a) and (b) of to the
bearings Sl.No. 5 above are parts.
Inner and outer rings of - do - roller bearings covered by items (a) and (b) of
Sl. No. 5 above (c) Others 15% ad valorem" Serial No.5 therein referred to
relates to "roller bearings of all types".
respondents filed a writ petition in the Bombay High Court. The goods were
allowed to be cleared by the High Court on the basis of a provisional
assessment extending the benefit to the respondents of Sl.No. 6(c). The
appellants preferred a Special Leave Petition to this Court; therein the
appellants were directed to issue a show cause notice to the respondents and finalise
the assessment of the goods by 6th September, 1991.
notice in this behalf was issued. The respondents were heard and the Collector
of Customs (Judicial) made an order on 30th August, 1991. He held that the goods were
covered by Sl.No. 6(c) and not Sl. No. 6(a). For the purpose of valuation, he
rejected the transaction value of the goods inasmuch as the goods had been imported
from a trader in Hongkong and the price list of the manufacturer of the goods
had not been produced. The transaction value of the goods was ridiculously law
when compared to the c.i.f. value of different brands of similar goods. In the
Collector's view, the transaction value, was in the circumstances,
unacceptable. The Collector noted the price lists of imported bearings of
Chinese, Russian, Czechoslovakian and German origin and, by arduous reasoning,
concluded that one set of the goods should be valued at Rs.5.64 per cup and the
other set at Rs.21.38 per cup.
respondents appealed to the Customs Excise & Gold (Control) Appellate
Tribunal against the Collector's findings on classification and valuation. The
appellants preferred an appeal in regard to penalty and fine (with which we are
not here concerned).
Tribunal found, thus:
and cones of roller bearings are two separate entities by themselves as known
in the concerned trade and industry. Each is a readily identifiable component
and both these parts put together would almost constitute a bearing without
certain small parts of bearings and this appears to be the reason behind
assessing cups and cones when imported together at the same rate as applicable
to the bearings, as cups and cones imported together acquire the essential
character of a bearing." The meaning of the words "and " and
"or" as set out in law lexicons and judgments was then adverted to .
As far as the Exemption Notification was concerned, it was clear to the
Tribunal that the imported cups did not fall within the term "Others"
against Sl.No. 6(c). It was not, the Tribunal observed, a question of the
respondents (importers) "seeking to read the word "and" that is,
in conjunctive manner".
valuation, the Tribunal found that the Collector had compared unbranded
bearings with bearings bearing reputed brand names. He had compared the
assessable value of the cups, which he had held to be of Chinese origin, with
the price of bearings imported from Czechoslovakia as the value of similar articles was not available in the
price list of bearings from Russia. He
had, subsequently, determined the value of Chinese bearings on best judgment
assessment based on branded bearings of Russian origin. This determination was
patently erroneous as unbraced goods could not be compared in price to branded
goods and goods of one country of origin could not be said to be comparable to
goods manufactured in another country. There was, further, no basis upon which
the Collector could determine the valued of cups and cones in the ratio of 30 :
70. Therefore, the assessable value determined in the order under challenge
before the Tribunal could not be held to be correct and had to be discarded and
the invoice value of the goods.
as classification is concerned, learned counsel for the appellants submitted
that the Tribunal ought to have read the entry in the Exemption Notification as
any ordinary man would have read it and not have got misled by legal
interpretations of the words "and" and "or". Learned
counsel for the respondents submitted that caps and cones and inner and outer
rings of roller bearings comprised the entirety of roller bearings and,
therefore, there was no scope for the classification of "Others" in Sl.
No.6 unless the words " cups and cones" were read as one whole; in
other words, it was only if the classification "others" was applied
to caps imported separately, cones imported separately, inner rings imported
separately and outer rings imported separately that the classification
"Other" made sense. For this purpose learned counsel relied upon the
extract of the Tribunal's order which we have quoted above.
that the extracted order says is that cups and cones are the major component
parts of roller bearings. The Tribunal does not hold that cups, cones and inner
and outer rings comprise the entirety of roller bearings.
view, the Tribunal mis-directed itself. There is not question of reading the
word "and" disjunctively here.
Exemption Notification must be read plainly, as an ordinary man would read it,
and, so read, Sl.No. 6(a) says that cups of roller bearings are liable to the
duty applicable to the bearings of which they are part and cones of roller
bearings are liable to the rate of duty applicable to the bearings of which
they are part. There is no justification for reading the entry connectively in
the sense that the rate of duty applicable to the bearings of which they are
part will apply only when the cups and cones of roller bearings are imported
together but not if they are imported separately.
as valuation is concerned, the Collector was right in rejecting the transaction
value of the goods because, plainly, it was a totally unrealistic value. For
the purpose of placing a value on the goods, however, the Collector resorted to
very tenuous reasoning which we cannot uphold. At the same time, we must say
that we do not approve of the findings of the Tribunal in this behalf, which we
have referred to above. It may in given case be necessary to value unbranded
goods on the basis of the known price of branded goods and also the goods of
the one country of origin, but the linkage must be appreciable and approximate.
of the view that the matter of valuation of the goods must go back to the
Collector and the respondents and appellants should have that opportunity to
place before him material as may enable him to arrive at their assessable
appeal is allowed, The judgment and order the Tribunal under appeal is set
aside. The matter is remanded to the Collector of Customs (Judicial), Bombay, or an equivalent officer. He shall
proceed upon the basis that the goods fall under Sl. No. 6(a) of the Exemption
shall assess the value of the goods afresh, taking into account the material placed
before him, and determine the Customs duty payable thereon.
shall be no order as to costs.
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