TMI Blog1985 (7) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... Serial No. 1 of the A.M. 84 policy. The Customs House objected to the clearance of these consignments under the O.G.L. on the grounds that the importer s registration certificate with the Director of Industries carried the endorsement of Tractor on provisional basis as an additional item of manufacture, that the goods imported were tractors in dis-assembled version, that the importers did not submit to the Customs authorities a copy of their application to the Director of Industries showing their manufacturing programme, that the goods under import were categorised as capital goods and required a capital goods import licence for their importation and that certain goods as mentioned in the show cause notice did not in any case come within the purview of O.G.L. in Appendix 10 Serial No. 1 as they fell within the category of banned/restricted goods in Appendices 3 and 5 of the Policy. After observing the due process of adjudication, the Additional Collector of Customs passed the impugned order which is before us in appeal. 2. The learned Advocate, Shri J.R. Gagrat argued that the appellant was a manufacturer in the small scale industrial sector with registration certificate valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his letter included the specifications of deleted parts which the Company included in phase 1 of its programme. As per phases 2 and 3 some more items were sought to be deleted from the import requirements. The Advocate submitted that the goods imported were covered under O.G.L Appendix 10 Serial No. 1 and the goods had been imported before the expiry of the validity of the endorsement for the manufacture of tractors. On 29-7-1983, the Company had signed the contract for the supply of 1000 sets of components of Agricultural tractors UML 6AM with the Soviet suppliers. The specifications as enclosures to the contract also gave the phased manufacturing programme of the appellants. These were the same as those submitted to the sponsoring authority. These documents would answer the allegation that the intention of the Company was to import the whole tractors in knocked down condition. The appellants placed who indents on 8-7-1983 and 25-8-1983 for 50 sets each and these were covered by Ls/C dated 26-7-1983 and 24-8-1983, respectively. Thereafter, revised indents were placed on 9-12-1983 and the two Ls/C were amended on 12-12-1983. Thus, the Company entered into bona fide firm commitments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, Small Scale Industries in his letter dated 16-7-1984. On 12-1-1984, there was a change in the policy by issue of a Notification under which the components of tractors were removed from the OGL. However, as clarified in the Government s letter dated 19-3-1985, the components were allowed to be imported if irrevocable L/C had been opened before the date of notification namely 12-1-1984. The Advocate repeated his contention that the two Ls/C had been opened before the crucial date for the imports under appeal and hence as per this clarification, the imports were eligible to the benefit of the OGL without the restrictions. As regards the Customs contention that as per para 244 of the Policy Book, the rules for interpretation of the Customs Tariff would apply to the classification of the goods under the import policy and that therefore the goods imported were tractors and not raw materials and components falling under OGL, the Advocate Submitted that he had obtained a specific clarification from the DGTD as advised under Para 242(3) and hence the provisions of Para 244 would not apply. The Advocate also referred to the supplier s clarification in their letter dated 16-7-1984 which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anilal Co. [1981 E.L.T. page 75]. In view of these submissions, he requested that the Collector s order be set aside and the appeal should be allowed. 3. The learned Senior Departmental Representative Shri Pal at the outset opposed the tendering of additional evidence through the appellant s miscellaneous Application No. 151/85. He stated that this evidence was not in existence when the order was passed and hence this evidence should not be taken into account. Coming to the facts of the case, Shri Pal stated that both the Bs/E were assessed on the same date, namely, 3-7-1984 and both the consignments were offered clearance on execution of ITC bonds. However, the appellants took clearance of one consignment only under bond. Shri Pal argued that the department took objections to the clearance of the consignments on two grounds. Firstly, it was held that the importers did not comply with the requirements of Para 21 (a) of Appendix 10 of the ITC Policy as they did not possess a valid registration for the manufacture of tractors and they had no manufacturing programme for assembling of tractors. Even in the declaration filed in the B/E filed at the time of clearance of the two consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Serial No. 1 of Appendix 10, Shri Pal argued that the provisions of the OGL were subject to the restrictions under Appendices 3 and 5 and certain components came within the restrictions under Appendices 3 and 5. These items were (1) Power packs which are diesel engines and which come under Serial No. 470 of Appendix 3; (2) front axle wheel assembly which would come under Serial No. 413 of Appendix 5; (3) Hydraulic steering assembly and hydraulic control assembly which would come under Serial No. 432 (17) of Appendix 3; and (4) rear rims with tyres and tubes which would fall under Serial No. 351 of Appendix 3. The values of the respective offending goods of the 4 categories had also been given in the show cause notice and the adjudication order. In any case, the components of these four categories cannot be cleared under O.G.L. as the same fell within the category of banned/ restricted items. 4. Shri Pal further added that the total value of the two consignments came to Rs. 35,13,687/-. The Import (Control) Order, 1955 has the Indian Customs Tariff Annexed as Schedule I. Note 1 of this schedule gave the indication about interpreting the schedule for the import trade contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants Miscellaneous Application No. 151/85, the Advocate state that the Government had permitted import of various articles under the broad banding scheme for the purposes of industrial licensing, and the appellants C.O.B. licence No. IL 71(85), dated 28-2-1985, a copy of which had also been submitted with that Miscellaneous Application No. 151/85, permitted the import of the goods in question. As regards the SDR s arguments that certain items were hit by the restrictions under Appendices 3 and 5, the Advocate stated that this argument was not correct as the goods had been imported after obtaining DGTD s clarification as per para 242(3) of the Import Policy. A copy of the DGTD s letter had also been filed with the paper-book. As an alternative argument he submitted that under Serial No. 433 of Appendix 3 only automotive components are restricted and the goods under import are meant for tractors which would not cover automotive components. As regards the department s reliance on Serial No. 351 of Appendix 3, the Advocate stated that this applies to rubber products while the imported goods were rear rims with tyres and tubes. Rims were not rubber products and hence Serial No. 351 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was provisional in nature. It was further held that at the time of adjudication of the case, the validity of the certificate had expired. The learned Advocate for the appellants had contended that the Additional Collector s order is not correct. The importers had a valid certificate at the time of import and this has to be decided in terms of Section 46 when the B/E is filed for the clearances of the goods and not when the Additional Collector decides this case. I find there is a great substance in this argument of the Advocate and the same is correct. As regards the provisional nature of the certificate, there would be no objection also provided this endorsement is otherwise valid. However, it was alleged and consequently accepted by the Additional Collector in his impugned order that the import of the goods in question require clearance from the Ministry of Industries as the imports entailed collaboration with foreign suppliers. It was observed by the Additional Collector that the importers were using the name of Bellares Tractor and would be marketing the products as Espi-Bellares tractors. In view of this allegation and finding the question for consideration before is whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Rules of Interpretation under CCCN as made applicable to the ITC policy to show that the imports consist of tractors in knocked down condition and not tractor parts and components. Besides, they have gone by the packing list and the quality control certificate from the suppliers which have described the goods Tractor UNZ-6AM in dis-assembled version Tractor Parts and Units . These facts are incorporated in the Additional Collector s order. He has further observed that the packing list stated that the Tractor Units were produced as tropical version and were preserved for a period of one year. The appellants have argued that the Additional Collector s finding is not correct. Referring to Para 239(2) of the Policy Book, the Advocate has contended that the goods were tractor parts and components and not complete tractors. The imported goods were minus the components which were to be procured locally as per the manufacturing programme of the appellants. The Advocate has also relied on the certificate from the DGTD in the letter dated 7-10-1983 and urged that this should be taken as the authority for clarification of the issue by virtue of the provisions of Para 242(3) of the Pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cycles/scooters in CKD condition under Serial Nos. 294 and 295 of Section 2 of Part IV of Schedule I and the remarks against Serial No. 295, the Supreme Court held that the import of the parts in two different consignments did not amount to the import of motor cycles/scooters in CKD condition. A benefit of this decision is claimed by the appellants in the present instance. While the imports considered by the Supreme Court and by us in the present appeal constitute motor cycles and tractors in CKD condition, the two imports have to be viewed in their respective contexts. In the case of Tarachand Gupta and Brothers, they held the licence for the import of parts for motor cycles/scooters under Serial No. 294. The Collector of Customs extended the remarks appearing under Serial No. 295 to the licence issued under Serial No. 294 to deny the clearance of the motor cycle/scooter parts to M/s. Tarachand Gupta and Brothers. The Supreme Court clearly held that this was not warranted and accordingly turned down the appeal of Union of India. In the present case, the import is against OGL for raw materials, components and consumables other than those restricted or banned. However, as per the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly valid contention of the Advocate which is acceptable is the submission that Serial No. 351 of Appendix 3 would not cover the rims. But this does not affect the merits of the case as the imports are otherwise invalid as mentioned above. 8. An argument has also been advanced that the components of tractors and combine harvesters were restricted under Public Notice No. 2/84, dated 12-1-1984 and since the Letters of Credit for the two consignments in question had been opened earlier and firm commitments made for these imports, the consignments should not be treated as coming within the aforesaid restriction. While urging this point, the Advocate has taken pains to distinguish the tractor parts from the motor vehicle parts. Similarly, the learned SDR has offered counter arguments to show that the goods imported were of restricted category. Both the sides have relied on the orders contained in the Handbook and the Customs Tariff in support of their contentions. While it is conceded that the firm commitment for the import of the two consignments was made before the date of issue of the Public Notice 2/84, dated 12-1-1984, the question as to whether the goods are tractor parts or mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted registration certificate by the General Manager, District Centre dated 15-4-1980. Originally the certificate was for the manufacturing/processing activity agricultural machineries/implements. This certificate was amended and the item Tractor was added on 6-7-1983 on provisional basis for a period of one year (vide Exhibit C at page 54 of the paper book). 13. The appellant entered into a contract dated 29-7-1983 with Traktoro export, Mosco for the import of the 1000 sets of components of agricultural tractors UNZ 6AM with power pack components of engine D65M and rear wheels 15 x 30" (vide Exhibit D page 71). This contract also contained an enclosure of components which were not to be delivered by the foreign supplier. 14. The appellant placed two indents each for 50 sets on 8-7-1983 vide indent No. 29/83. The appellant also opened two Letters of Credits one on 26-7-1983 and 26-8-1983. These letters of credit were subsequently amended and the period of shipment was extended till 15-2-1984 and the period of negotiation of document till 29-2-1984. 15. The foreign suppliers shipped the goods as per the indents under Bills of Lading Nos. 1 2 both dated 23-2-1984. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t components of the tractor. The import of tractor is not covered under OGL as per these conditions it is the end-product of the importer. Further, it gathers strength from the fact that the Quality Certificate furnished by importers describes goods as tractor in disassembled version. Even the shipping specifications and packing list describes the goods as such. The import requires specific licence. (iii) Without prejudice to (ii) above the import inter alia covers power pack components exclusively for tractor. The break 7 up prices of goods has been given in the enclosure to the invoice of imports. This list covers 15 items in one set for the total value of Rs. 9,761.94 ps. per set. It appears that the goods imported under this category are engine in CKD condition. The Horse Power of the engine is 65 of H.P. Thus value of Rs. 9,76,194/- in two bills of entries is covered by the Appendix 3 of Import Policy as Diesel Engine upto including 1350 HPs are covered by Serial 470 of Appendix 3 of the Import Policy. This Import Appendix 3 covers items which are listed for limited permissible import and they are excluded from Appendix 10 Serial 1. (iv) Without prejudice to (ii) above th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings irrespective of fact whether or not any payment is involved as per their technical collaboration agreement on being produced to the Government of India for their approval. (v) That imported goods include engine power pack components stearing assembly, draft control (being hydraulic control assembly) tyre and tubes made of rubber and all these are Appendix 3 items which fell outside the scope of OGL Appendix 10 Serial (1). The total value of the aforesaid items works to Rs. 20,98,875/-. (vi) The imported goods further include front axle with half frame assembly and transmission assembly with differential Rear Axle etc. The import of these items would be hit by 413 of Appendix 5 and as such, they are not liable for import under the provisions of OGL of Appendix 10 Serial No. 1. The goods are thus valued at Rs. 14,14,8121- The foregoing appeared to disclose that both the consignments valued at Rs. 35,13,687/- have been imported in breach of provisions of Section 111(d) and 111(m) of the Customs Act, 1962 read with Section 3(2) of Imports Exports Control Act, 1947. Without prejudice to the above, it is also alleged that imported goods are diesel engines, Hydraulic Steari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration, the appellants have submitted that their programme was a phased programme, and their was no representation that the components would not be imported during the thirst phase. Shri Gagrat has further contended that the goods imported are not complete tractors but only components and the components Imported covers 70% of the tractor and 30% are indigenously manufactured. In support of his contention that the goods imported are components of tractors, Shri Gagrat relied upon the letter of the suppliers dated 16th July. Shri Gagrat further contended that none of the components fall under Appendices 3, 4 or 5, because they are all components of tractors and Director General of Technical Development had issued clarification that the components imported are permissible items under OGL Appendix 10(1) and they fall within the ambit of Item 89 of list 8 of Appendix 10. Shri Gagrat had urged that the clarification given by D.G.T.D is binding on the Customs. Shri Gagrat also contended that for the purposes of levying Customs duty, Bills of Entry were assessed as components of tractors and therefore it is not open to the Customs to contend that what had been imported are tractors in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The import required a clearance from Ministry of Industries due to foreign collaboration of the importers; and (g) That the registration granted to the appellant had expired before the clearance of the consignment in one case and in another the imported goods as still in the Customs Warehouse. 23. On behalf of the appellant, it was urged that there was a valid registration certificate for the manufacture of tractor not only at the time the appellant opened a Letter of Credit and at the time of shipment but also when they sought clearance and in the said circumstances the Additional Collector s findings, that the registration granted to the appellant expired before the clearance of the consignment, is factually incorrect. There appears considerable force in this contention. The registration certificate is dated 15-4-1980 vide Exhibit C , page 54 of the paper book. The item tractor was added on 6-7-1983 on a provisional basis for a period of one year. The opening of the L/Cs and amendment to the L/Cs took place on or before 24-8-1983. The shipments, as could be seen from the various Bills of Lading, were also prior to the expiry of the period prescribed in the provisional re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently the Custom House further addressed a telegram to the Director of Industries, Haryana on 22-12-1984 seeking confirmation if provisional registration was extended beyond 5-7-1984. No reply had been received. 25. The appellant had annexed the copy of the letter dated 31-3-1983 made to the General Manager, District Industries Center, Faridabad (vide Exhibit A pages 39 to 44 of the paper book). The appellant had also produced a letter dated 1-7-1983 addressed to the General Manager, District Industries Center along with the appellant s organisational structure, technical plan and other information on tractor project (vide Exhibit B pages 45 to 53 of the paper book). In their letter dated 31-3-1983 while referring to their manufacturing activity they stated that they had decided to expand and diversify their activities. Therefore they requested the District Manager to add the following words to the original certificate ITEM ADDED TRACTORS AND PADDY PLANTERS . In this letter, among other things, the appellants stated that with their rich experience, technical staff, professional management, machineries and adequate ancillary facilities available in Faridabad, they wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book enclosed) to the letter dated 1-7-1983. On the basis of the above documents, Shri Gagrat contended that before the General Manager, District and Industrial Center made the endorsement regarding tractor he was made known that components would be imported by supplying the copy of the letter dated 25-6-1983 received from M/s. Traktoroexport, Moscow. Shri Gagrat further contended that the Additional Collector committed an error in holding that the appellant made any representation to the Director of Industries that the appellant was to assemble tractors based primarily on indegerious components and as such there was a breach of condition contained in para 21(a) of Appendix 10. Shri Pal, appearing for the Collector, however, urged the annexure, Exhibit B to the letter dated 1-7-1983 clearly gives an impression that there was no proposal to import components and the components were to be obtained indigenously. Shri Pal submitted that in the enclosure B to the letter dated 1-7-1983, the appellant has clearly stated that in and around Faridabad, a large number of fully equipped ancillary equipment is already in existence catering to the needs of the tractor industry whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of District Industries Center have also been designated sponsoring authorities of concerned Units in the small scale and cottage sectors. It was the General Manager of the District Industries Center which granted the provisional certificate adding tractor as one of the manufacturing items in the certificate of registration. The General Manager did not attach any condition. The certificate did not state that import of components are not permitted. In the absence of such a condition the import cannot be objected to by the Customs authorities on the ground that at the time of making an application for registration there was a representation that no components would be imported. It is not within the province of the Customs authority either to investigate or enquire into as to how and in what manner the appellant obtained the registration certificate. There was a registration certificate by a competent authority for the manufacture of tractors and that certificate was valid upto 6-7-1984. The declaration required vide para 21(a) of Appendix 10 was admittedly made by the appellant at the time of clearance. Even assuming that there was mis-representation or suppression of facts by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(a) is not well-founded. It is true that the registration granted for the tractor was provisional and was for a period of one year. It is also true that at the time of passing the adjudication order there was no proof as to whether the period was extended or not. But then the relevant date for the purpose of Customs clearance is the date of shipment and could be the date on which the appellant sought to clear the goods. The provisional registration was valid from 6-7-1983 to 5-7-1984. The shipment took place on 13-2-1984. The Bills of Entry were filed on 12-3-1984 and 19-4-1984 well within the validity of the registration certificate. It is thus seen that at the time of importation as well as at the time of clearance there was a valid certificate of registration issued by a competent authority and as such there could be no objection for the release of the consignments. The extension or otherwise of the validity period of the registration certificate is immaterial; so far as the release of the goods by goods by Customs is concerned. The appellant takes a risk if its provisional certificate was not extended. What should happen to the imported goods subsequent to import is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r charges payable under the Act in respect of the said goods. Section 48 authorises the Proper Officer to sell the imported goods if they are not-cleared for home consumption or warehoused or transshipped within the two months from the date of the unloading of the goods. Having regard to the above provisions the expression at the time of clearance could only mean the date on which the clearance was sought by the party by presenting a Bill of Entry. The expression at the time of clearance appearing in para 21(a) of Appendix 10 cannot be interpreted to mean the date on which the actual physical clearance of the goods takes place. Such an interpretation would defeat the scheme of the Act. In the instant case, the Bills of Entry in respect of the two consignments were filed within the validity period of the provisional registration. Therefore, the view taken by the Additional Collector, that the registration granted to the appellant had expired before the clearance of the consignments, is erroneous. 28. The only other ground on which the import was held to be bad was that the import required a clearance from the Ministry of Industry, due to the foreign collaboration of the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake any other enquiry or authorise the Customs authority to impose any other condition before clearance of the imported goods. Thus all the factors which were taken into consideration by the Additional Collector to hold that the import was not valid are not at all relevant and they are untenable. 30. The next ground on which the import was held invalid was that what had been imported is not components of tractors but the tractors in CKD condition. In the show cause notice it was alleged that the item of tractors fall under the category of Capital Goods and as such they need the Capital Goods Import Licence for their importation and no such capital goods Import Licence had been produced for the clearance through Customs. The further allegation in the show cause notice was that the appellant appeared to have made a mis-declaration that the imported goods are components of tractors with a view to get them accommodated within the scope of OGL, Appendix 10 Serial No. 1. The Additional Collector did not, however, record a specific finding that what had been imported are complete tractors and not components of tractors. 31. During the hearing of the appeal, Shri Pal, appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted nor the tractor as an end-product would fall within the definition Capital Goods . Shri Gagrat relied on the decision of the Supreme Court reported in AIR 1971 Supreme Court page 1558 - Tarachand Gupta and Brothers v. Union of India in support of his contention that the Customs cannot object to the import solely on the ground that the parts imported if assembled would be a complete tractor and therefore impermissible for import. Let me in the first instance examine the Department s contention that what had been imported are tractors in CKD condition. Exhibit E (page 71 of the paper book) is a copy of the contract dated 29-7-1983 entered into by the appellant with Traktoroexport, Moscow. The contract was to import 1000 sets of components of agricultural tractors UMZ-6AM with Power Pack Components of engine D-65M and Rear Wheels 15 x 30" components and units. In this contract, it was further stipulated enclosure No. (1) will not be delivered. The enclosure No. (1) consists of 135 items value of each item or all the items put together was however not given. The contention of the appellant that the entire electrical system was not to be imported had not been controverted. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. As regards the factory quality certificate No. 42, the suppliers stated that the factory produces various models of tractors and tropicalised version is one type. Components for these for export have been preserved with chemicals. The word preservation is used always for components and parts and never for tractors. In this letter, the suppliers also clarified that the following engine parts are made in India and without which no engine is complete; (1) filter, (2) muffler, (3) shield, (4) clip. Having regard to the clarification of the suppliers regarding documents relied upon by the Department; and having regard to the contract that was entered into and the descriptions contained in the letters of indent, invoice, Bills of Lading, packing list and the list of components not to be imported, it could be safely held that what were imported are not tractors in CKD condition. In this connection, reference may be usefully made to the decision of the Supreme Court referred to earlier, namely, Union of India v. Tarachand Gupta and Brothers. The Supreme Court was considering the entries 294 and 295 of Section II of part IV of Schedule I of the Import Trade (Control) Policy for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the Collector were to adopt such an approach he would be acting contrary to and beyond entry 295, under which he had to find out whether the goods imported were of the description in that entry. Such an approach would be in non-compliance of entry 295. It was further observed by the Supreme Court that the only question, therefore, before the Collector was whether the respondents licence covered the goods imported by them i.e., whether the goods were parts and accessories. If they were, the imports were legitimate and no question of their being not covered by the licence or the respondents having committed breach of Section 3 of the Imports and Exports (Control) Act or Section 167(8) of the Sea Customs Act would possibly arise. What the Collector, however, did was that he put the two consignments together and held that they made up 51 Rixe Mopeds in CKD condition and were, for that reason, not the articles covered by Entry 295, but articles prohibited under remark (ii) of entry 294. Supreme Court observed remarks (ii) containing that prohibition had nothing to do with entry 295 which did not contain any limitations or restrictions whatsoever against imports of parts and accesso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct Interpretation Rule 2(A) of the Rules for Interpretation of the Schedule and the clarification contained in Customs Tariff Nomenclature Explanatory Notes for incomplete machines and unassembled machines they will be assessed to duty as per the essential character of the machines. The goods under import have the essential character of the tractor only items, such as, batteries, electrical wiring are missing parts and therefore the essential character of the components under import is tractor and not components of a tractor and as such they cannot be imported under OGL. Para 244 begins with the word Save as above . Shri Gagrat appearing for the appellant submitted that resort to the first schedule in the Customs Tariff Act can be made only in respect of matters which are not covered by the paragraphs which preceded para 244. He urged the para that is relevant for the interpretation is para 242 and not para 244. There is considerable force in this contention. Para 244 begins with the words Save as above . Thus it is clear if the other paragraphs are applicable then resort cannot be had to para 244. Chapter 22 of the Policy deals with clarification and interpretation of the policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions of the Notification are complied with. Surely that could not have been the intention of the Government of India and it is clear that the Government desired that the exemption should be granted once the conditions of the Notification including the condition of certificate from the Directorate General are complied with. 35. The ratio of the above decision would apply to the facts of the present case. Under the Policy the DGTD was constituted as the authority to clarify the scope of any item appearing in appendices 1 to 5, 8 to 10, 15 and 30. The DGTD had clarified that the imported items would be components falling under item 89 of list 8 of Appendix 10. That clarification should be respected by the Customs. In any case, having regard to the wording of para 244 it is not open to the Customs authorities to resort to Customs Tariff Act for the purposes of classification. For the foregoing reasons, I reject the Department s contention that what was imported were tractors and not components of tractors. 36. In the show cause notice if was alleged that the following items cannot be imported under OGL Appendix 10(1) inasmuch as they fall within Appendix 3 which are not permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Appendix 3. Shri Gagrat urged that the Department is acting in a self contradicting manner inasmuch as while on the one hand it wants to invoke the Rules for the interpretation of the Customs Tariff for decinding the Import Trade Control issue and for holding that what has been imported are complete tractors on the other hand it wants to assess what has been imported as individual component in the relevant Bills of Entry. The allegation of the Department that tractor is an item of Capital Goods is also entirely wrong in the context of the manufacturing activity of the firm. In support of his contention, Shri Gagrat referred to the definition of the Capital Goods found in para 58 of the Import Policy A.M. 84 and contended that neither the components imported or the end-product tractor could fall within the definition of Capital Goods and therefore the contention of the Department that the component imported are complete units is erroneous. As regards the front axle with half frame assembly and transmission assembly with .the differential clutch, control brake, rear axle housing etc., Shri Gagrat urged that Serial No. 413 of Appendix 5 of the Import Policy covers the industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers for which irrevocable letter of credits are opened and established on or before 29-2-1984 and the shipment is allowed upto 30-6-1984. Para 21(a) requires the Actual User (Industrial) to furnish to the Customs Authority a declaration giving particulars of their industrial licence or registration and other particulars as are set out in that paragraph. In respect of units registered with DGTD, Actual Users (Industrial) are required to furnish a list of components duly attested by DGTD. The items of raw materials components and consumables allowed under OGL are enumerated in list 8 of Appendix 10. Item 89 of list 8 reads : All components, of machines tools, machinery, equipment, instruments and other engineering item (including consumable durables) covered under OGL excluding electronic components . 41. The expression Capital Goods is defined in paragraph 5(8) of Chapter 2. Capital Goods means any plant machineries, equipment, or accessories required by an investor for production of goods or for rendering services including those required for replacement or expansion. Appendix 3 contains list of limited components, consumables tools and spares (other than iron, steel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oice Nos. 61/13065 and 61/13066 describe to goods as components of Belarus tractor UMZ-6AM as per list attached for 50 sets . Payment will be made at 180 days after the date of Bill of Lading as on 11-8-1984 under Bill of Lading of exchange 2910019 respectively. The enclosure along with the invoice refer to the split up prices of power pack components. The power pack is the engine assembly. The packing list enclosed describes the same as unitised assembly. The other items given quantity per set. This inter alia covers items such as Hydraulic Steering hydraulic booster, main fuel tank, clutch radiator along with the other items such as nuts, screws, bolts, sleeves, lock, gaskets, pipes etc. It was further stated in the show cause notice from the packing list it is observed that the description of the goods is given as under Tractor UMZ-6AM in dis-assembled version - tractor parts and units . The quality control certificate describes the goods as Tractor in disassembled version. It is further added therein Tractor units are produced as the tropical version and are preserved for a period of one year . This also refers to marks and numbers as UMZ-6AM and N-3353, 12-14, 17, 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to make a complete engine and which are to be manufactured in India. They are : (1) Filter, (2) Muffler, (3) Shield, (4) Clip. The Additional Collector has also recorded a finding that power pack items are complete except parts, such as, filter, muffler, shield and clip. 45. Now from the facts established, it is abundantly clear that only certain components of engines were imported. They were imported in the form of components and not in assembled form so as to make a diesel engine. Diesel engine has to be assembled from out of the imported components and some other components. The imported components, if assembled, also would not make a diesel engine because some more components have to be fitted into it. In the circumstances, the finding of the Additional Collector, that the diesel engines are imported in CKD condition and therefore, Item 470 of Appendix 3 would be attracted, appears not correct. Since diesel engine, as such, has not been imported as OGL item, the import is not hit by item 470 of Appendix 3.1, therefore, set aside that part of the Additional Collector s order. 46. In so far as the other objected items, the finding of the Additional Collector is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and industrial tractors. In Union of India v. Delhi Cloth Mills [AIR 1963 S.C. 791], the agricultural tractor is defined as under : - Agricultural tractor a self propelled vehicle having wheels or tracks, designed primarily to operate trailer or mounted agricultural implements, and machines, including trailers and to supply power to operate them with the vehicle itself in motion or remaining stationery. In Mahendra Mahendra v. Union of India and others [1984 (18) E.L.T. 262 (Bom.)], Her Lordhsip Smt. Sujata v. Manohar (J) considered the distinction between the agricultural tractors and industrial tractors. It was observed on industrial tractors a hydraulic system with draft control and position control is not provided because these industrial tractors are used for hauling and material handling purposes only. 47. It was not contended and probably it could not be contended that what had been imported are marine gears and gear boxes and therefore there is no scope to invoke Item 413 of Appendix 5 and as such no objection can be taken for the import of front axle with half frame assembly or transmission assembly with differential control linkage, brakes with rear axle, drive h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered the scope of the DGTD s letter dated 7-10-1983 and further considered the contentions that tractors is an automotive and rejected the appellant s contention. Having regard to the sweep of Item 351, Appendix 3 the import of tyres and tubes under OGL at the relevant time was impermissible as OGL items and therefore, the Customs authorities were justified in contending that the tyres and tubes which are admittedly made of rubber would be rubber products within the meaning of entry 351 of Appendix 3. The Department however, has taken the value of rims also but that value has to be excluded. 50. To sum up : - (1) What had been imported by the appellant are not tractors but only components of tractors. Further, the imported components if assembled also would not make a complete tractor. Number of components required to make a complete tractor are not imported and therefore it cannot be contended that import was tractor in dis-assembled or CKD condition. The assembly of components of tractors would itself be a manufacturing process as the assembly of tractors cannot be done by a screw driver technology. It would involve several stages needing sophisticated technology and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each consignment. The order of confiscation of other items are set aside. 52. In the result this appeal is allowed in part. The confiscation of the components of power pack as well as front axle with half frame assembly and other components treated as gears or gear boxes are set aside. The confiscation of steering assembly, draft control, hydraulic control assembly and tyres and tubes is confirmed but the amount of fine in lieu of confiscation is reduced from Rs. 10 lakhs to Rs. one lakh in respect of each consignment. The appellant be granted consequential relief. 53. As there is difference of opinion between the two Members, the records of the appeal be submitted to the President for referring the following points of difference to one or more other Member of the Tribunal : (1) Whether what had been imported are tractors and diesel engines in unassembled condition or are only certain of the components of the tractors and diesel engines. (2) Whether the import of power packs in the manner in which they were imported was covered by Serial No. 470 of Appendix-3 of the Import Policy 1983-84, (3) Whether the item Front Axle with half frame assembly and other components are ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference dated 3-2-1986 of Brother Shri Dilipsinhji, the matter required reference to determine whether in the facts and circumstances of the case, the two imports covered by the appeal offend the Trade Control Regulations and the penal action taken by the Additional Collector of Customs is correct or not. 59. From the impugned order it is observed that the Additional Collector of Customs, Bombay in respect of Bill of Entry No. 2783/25 having been made in contravention with the provisions of Section 111(d) of Customs Act, 1962 read with Section 3(2) of Imports Exports Control Ac, 1947 ordered the terms of the bond to be enforced for a sum of Rs. 10 lacs towards fine in lieu of confiscation. Goods covered in respect of Bill of Entry No. 2783/24 valued at Rs. 20,26,500/- were also ordered to be confiscated with option to the appellants to redeem them on a fine of Rs. 10 lacs. From the order of Shri Dilipsinhji it is seen that in his view the Additional Collector s order was correct both on the grounds of fact and on law and he proposed to confirm the same and reject the appeal. From the order of Shri Hegde it is seen that he proposed to uphold the order of the Additional Collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration with the sponsoring authority. He also submitted that what had been imported by the appellants were not tractors or diesel engines but only components of the same. Components could not go to make complete tractor or diesel engines and required a number of complementary components. In that connection attention was drawn to list of 135 components as contained in Enclosure No. 1 to Contract No. 61/01-3341 of 29th July, 1983. The list contains names of 135 parts like filter, muffler, shield, clip, cap, gasket, bracket, wire, wire bundle, terminal, bushing, crip, cellar, gasket, washer, electric bulb, horn, headlamp, terminal strip, number plate lamp and the like and contended that in view of this the imported items could not be called tractor or diesel engines. He also invited attention to Notification dated 16-2-1973 No. S.O. 98(A)/IDRA/29B/ 73/1 issued by the Central Government in exercise of powers conferred by sub-section (1) of Section 29B of the Industries (Development Regulation) Act, 1951 which, inter alia, exempted small scale units from operation of the provisions of Sections 10, 11, 11 A and 13 of the Act. Attention in that connection was also drawn to the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted under this policy. He also submitted that the clarification of DGTD in matters of classification is not binding on the Customs authorities. In particular, he referred to para 245(1) of the policy under which in respect of matters not covered by earlier paras relating to Actual Users, Chief Controller of Imports Exports would be addressed for interpretation of the policy. He submitted that the Technical Member rightly held that tractors were capital goods. It was also submitted that the Customs authorities had addressed a communication to the Director of Industries, Haryana about the appellants registration and in view of his telegram and later silence the Customs authorities were justified in concluding against the appellants. In support of his argument Shri Paul relied on the following precedents : (1) Collector of Customs, Madras v. K. Ganga Setty [AIR 1963 (S.C. 1319]; (2) V.V. Iyer of Bombay v. Jasjit Singh Collector of Customs Another [AIR 1973 (S.C. 194]; (3) Western India Garments Ltd. v. Collector of Customs, Bombay [1984 (18) E.L.T. 588 (Tribunal)]. 63. Before the arguments are considered it would be useful to reproduce para 21 (a) of Appendix 10 : - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that pages 43 and 44 (Technology of Tractors and Paddy Transplanters) were not produced by the appellants before the Customs authorities and this contention was not applicable in view of the list of associates given in Enclosure C to their letter dated 1-7-1985 (Ex. B at page 45), Brother Shri Hegde in para 14 after referring to the documents above described observed the above documents or other documents in the file do not establish in clear terms that there was positive representation on the part of the appellant that no components would be imported. In later part of the same para he held :- It was the General Manager of the District Industries Center which granted the provisional certificate adding tractor as one of the manufacturing items in the certificate of registration. The General Manager did not attach any condition. The certificate did not state that import of components are not permitted. In the absence of such a condition the import cannot .be objected to by the Customs authorities on the ground that at the time of making an application for registration there was a representation that no components .would be imported. The Customs authorities were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t valid to cover the goods imported at the time when the appellant sought clearance. my finding would be that registration certificate was not valid to cover the goods imported. 65. In view of this finding, findings against other points formulated by Brother Shri Hegde appear unnecessary, but I would briefly deal with the same. 66. As to point No. 1 formulated by Brother Hegde whether the imports were tractors or diesel engines in unassembled condition, Brother Shri Dilipsinhji did not accept the appellants argument that DGTD certificate should be accepted. He held that it is a question of fact and cannot be decided on the basis of DGTD s letter alone. Relying on the description in Packing Specification and Quality Control certificate as also Rules of Interpretation, he held that goods were tractors in knocked down condition and not components or parts thereof. He did not accept the argument that DGTD certificate was final and distinguished the Supreme Court decision in Union of India v. Tarachand Gupta [AIR 1971 (S.C.) 1158]. He did not record a specific finding about diesel engines. 67. Brother Shri Hegde relying on letter dated 16-7-1984 from the suppliers to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of policy the imported goods merited treatment as tractors and diesel engines and not components of the same. 69. As to point of difference No. 3 formulated by Brother Hegde, Item 413 of Appendix 5 reads Industrial and Marine Gears and gear boxes (other than for automotive applications), the issue. has been discussed by Brother Hegde partly in para 28 and partly in para 31 and finding is to be found in para 33 where he says that it was not contended and could not be contended that what had been imported was marine gears and gear boxes and, therefore, Item 413 of Appendix 5 could not be attracted. Shri Dilipsinhji has not given any specific finding. However, no specific finding against this point on my part appears necessary because admittedly these items were imported only as what were claimed to be component parts of tractors/diesel engines and I have above found that the goods imported deserve treatment as tractors and diesel engines. Their import would also have to be treated as not permissible under OGL. 70. In view of the findings against four points formulated by Brother Shri Hegde, no specific finding in respect of point No. 5 appears necessary. It may, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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