9911796707
TMI Blog1990 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... item which is one of the restricted items in the List of Restricted Items described in Appendix 2, Part 8 of Import and Export Policy for April, 1988 - March, 1991. 3.The matrix of the case is that the Appellant has been carrying on business as sole proprietor under the name and style of M/s. Interior Manufacturers at A-12, Yuwan Apartments, 413/414, Mount Mary Road, Bandra, Bombay which is a small scale industry engaged in processing of stone slabs. In the course of his manufacturing activity the Appellant utilises and requires as raw material polishable calcareous stones viz. marble, travertine, ecaussine, alabaster and other calcareous stones. All these different types of stones are hard and capable of taking polish. Marble is distinguished from other calcareous rocks, by the fact that it is a metamorphic rock formed from re-crystallisation of limestones and has a visibly crystallined nature. In order to import calcareous stones covered by the Open General Licence and with a view to ensuring that the same was not marble, the Appellant took the following precautions :- (1) The appellant referred to the Indian Standards Specification for Marble viz. IS:1130-1969 which defines m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 approximately. The said Elle Marmi issued an invoice dated December 2, 1983 for the said purpose. 5.The goods arrived in Bombay by the vessel `Orient Triumph' on or about 19th January, 1989. The appellant filed a Bill of Entry No. 007569 dated 19-1-1989 for clearance of the goods for home consumption. The goods were declared as slabs of calcareous stones (other than marble) and were imported under OGL Appendix 5, Item I of Import and Export Policy for April, 1988-March, 1991. 6.The goods were inspected by the Assistant Collector (Docks) who observed as follows :- "These goods under import do not appear to be marble or granite and are not polished, they are roughly squared and are having smooth edges on all four sides but are having smooth edges on 2 or 3 sides due to sawing." The sample of the goods was sent by the Assistant Collector (Docks) to the Assistant Collector of Customs (Group I). The Assistant Collector of Customs (Group I) issued a query memo dated February 6, 1989 on the alleged basis that `calcareous stones are nothing but marble only' and, therefore, governed by Entry 62, Appendix 2, Part B of Import and Export Policy for March 1988 to April 1991. The query ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. The report of the Geological Survey of India on the sample forwarded by the Customs Department was set out earlier and sent in a sealed cover to the Customs Department. 12.The Customs Department, however, did not release the goods inspite of the categorical report of the Geological Survey of India and instead issued a show-cause notice dated Marach 17, 1989. The Customs Department inter alia relied upon the opinion based on visual observation received from the Indian Bureau of Mines, Government of India, Udaipur and test reports based on technical test received from the Director of Mines & Geology Department, Udaipur and Geological Survey of India, Nagpur. The test report received by the respondent from the Geological Survey of India, Nagpur was kept back and not disclosed to the appellant. None of the three reports/opinions were, disclosed to the appellant at the time of issue of show-cause notice. On the basis of these reports/opinions it was alleged in the show-cause notice that the imported goods were marble allegedly as per the commercial definition of marble enunciated in the show-cause notice. The Department threatened to confiscate the goods and initiate the penal act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing the appellant as well as the Revenue dismissed the appeal and confirmed the order of the Collector of Customs but reduced the penalty amount from Rs. 10,00,000 to Rs. 5,00,000. 16.Feeling aggrieved by the said order the appellant filed the instant appeal under Section 130-E(b) of the Customs Act, 1962. The entire controversy relates to the question whether the calcareous stone which has been imported by the appellant falling within the Tariff Item No. 25.15 of Schedule I, Appendix 1-B commonly known as I.T. Schedule is marble as mentioned in Entry No. 62 of the List of Restricted Items, Annexure 2, Part B of the Import and Export Policy for April 1988 to March 1991 and as such the import of calcareous stone made by the appellant being not covered under OGL, is liable for confiscation and penalty for illegal import without the specific import licence obtained from the respondent. In Appendix I-B, Schedule I of ITC Schedule, Entry No. 25.15 of Chapter 25 (Mineral Products) mentions : "Marble, travertine, ecaussine and any other calcareous monumental or building stone of an apparent specific gravity of 2.5 or more and Alabaster, whether or not roughly trimmed or merely cut b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. The term `marble' has to be given a meaning which fits in and harmonises in the above-mentioned statutory context, so that `marble' continues to remain distinct and different from the said other four items. Thus whatever principle of interpretation or canon of construction is applied it cannot be said that the term `marble' includes and takes within its fold any or more distinct items or goods mentioned in the said Tariff Entry, thereby rendering a part of the said Entry meaningless. It has, therefore, been submitted on behalf of the appellant that the term `marble' has to be interpreted in a manner which is in consonance with the context and which does not militate against it. It is appropriate to refer in this connection the following passage from Maxwell on Interpretation of Statutes, 12th Edition, Page 294 set out hereunder :- "The word `land' is generally understood as including buildings, but if, after imposing a rate on houses, buildings, works, tenements and hereditaments, an Act exempted `land', this word would be restricted to land unburdened with houses, buildings, or works which would otherwise have been unnecessarily enumerated." 21.It has been secondly subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 25.15 would automatically include within it the other four items thereby rendering the rest of the Tariff Entry otiose, redundant and meaningless. On this ground alone, it has been submitted that the test of commercial meaning of trade understanding necessarily has to be rejected and the same cannot be applied in the present case. It has also been contended on behalf of the appellant that from the language of the Tariff Entry itself it is only the technical meaning which can be applied for interpreting Chapter Heading 25.15. The expressions calcareous, travertine, ecaussine, and alabaster are all technical expressions known to the science of Geology which are found defined in Dictionaries of Geology. These are not terms of trade or expressions which businessmen use in the ordinary use to describe a product they deal in. However, the reference to the requirement of specific gravity of 2.5 or more is also more or less a technical requirement which evinces that the principle of trade nomenclature or commercial understanding is not applicable to the Tariff Item. Valuable guidance can also be obtained from the notes which are part of the Harmonised System of Nomenclature (HSN) with w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of confiscation and imposition of penalty and wholly unwarranted. 23.Mr. Ganguly, learned counsel appearing on behalf of the Revenue has submitted that in interpreting the word `marble' as mentioned in Tariff Item No. 25.15 in Appendix 1-B, Schedule 1 to the Import (Control) Order, 1955, the test in commercial and trade parlance has to be applied i.e. how the said product came to be commercially known by the trading people. It is further submitted that it is not a scientific or technical word and as such it does not require to be interpreted in its scientific and technical sense. He further submitted that the general principle of expression of Tariff Entries in a text statute is that of commercial nomenclature or understanding in the trade. The word `marble' if so interpreted will include calcareous stone of 2.5 or more specific gravity. He has cited certain decisions in support of his above contention. Mr. Ganguli also submitted referring to the Said Tariff Entry 25.15 that it includes calcareous stones of specific gravity of 2.5 or more which are capable of polish. Marble is the genus and all other four items of stone mentioned in the said Entry which are of apparent specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendix 1-B, Schedule I, commonly known as ITC Schedule to the Imports (Control) Order, 1955 comes within the purview of the restricted items mentioned in Item 62, Appendix 2, Part B of the Import and Export Policy April 1988-March 1991. In Entry No. 62, the restricted item is described as `Marble/granite/onyx'. Marble has not been defined either in the ITC Schedule or in Appendix 2, Part B of Import and Export Policy dealing with the list of restricted items. It is convenient to refer in this connection to para 64 of the Hand Book of Procedures, April 1988-March 1991 which is in the following terms :- Classification of Items 64.The Schedule I to the Imports (Control) Order,(1) 1955, reproduced in Appendix 1-B to this Book, commonly known as the I.T.C. Schedule, contains the classification of all the articles that enter into the import trade. With effect from 1st(2) April, 1988 the Schedule I to the Imports (Control) Order, 1955 reproduced in Appendix 1-B to this Book has been revised in alignment with the First Schedule of the Customs Tariff (Amendment) Act, 1985;. The Revised ITC Schedule contains 21 Sections sub-divided into 99 Chapters". 25.It is also convenient to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rock proposed to be imported and had the same tested by a reputed Geologist, Dr. S.F. Sethna who submitted his report dated October 13, 1988 confirming that the same sample was not marble. It has been stated in the said report that the sample is a limestone and thus differs from the marble in being of sedimentary origin and has not undergone any metamorphism to be considered under metamorphic rocks to be described as a marble. If the rock would have shown any slightest amount of metamorphism the recrystallization of carbonate crystals would make the individual crystals distinctly visible under the microscopic examination. 31.The appellant also referred to an Italian Book MARMI ITALTA wherein the index evidenced the fact that "Botticino" varieties were covered under "Polishable Calcareous Rocks" and not under "True Marbles (Re-crystallised Calcareous rocks). The appellant also while placing order asked the exporter to send a certificate about the calcareous stones for which order was placed for importation. The exporter, Elle Marmi of Italy issued a certificate dated December 6, 1988 certifying that all the rough slabs loaded are `calcareous stone slabs other than marble'. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that Tariff Item No. 25.15 mentions five kids of rocks such as Marble,Travertine, Ecaussine, Alabaster and other calcareous monumental or building stone of a specific gravity of 2.5 or more whereas in the List of Restricted Items - Item No. 62 only Marble/granite/onyx are mentioned. In the absence of any definition of the term `marble' it is to be decided what is the scope and meaning of the word marble and whether it includes within it the other kinds of calcareous stones such as travertine, ecaussine, alabaster and other calcareous monumental or building stone of a specific gravity of 2.5 or more in order to saddle the importer with the burden of obtaining a licence for importing the said restricted item. It has been submitted on behalf of the appellant that as the word `marble' has not been defined and the tariff item refers to calcareous stone of an apparent specific gravity of 2.5 or more, it has to be taken to be used in a technical and scientific sense and as such the same cannot be interpreted in the popular commercial sense or as understood in trade parlance by persons dealing with the said stones. 36.In deciding this question the first thing that requires to be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and held that only deodorised oil can be considered to be refined oil. This Court also referred to the specification of "refined oil" by the Indian Standards Institution and held that :- "This specification by the Indian Standards Institution furnishes very strong and indeed almost incontrovertible support for Dr. Nanji's (respondent's) view and the respondent's contention that without deodorisation the oil is not "refinded oil" as is known to the consumers and the commercial community". 38.In Dunlop India Ltd. v. Union of India and Ors., - 1983 (13) E.L.T. 1566 (S.C.) = 1976 (2) SCR 98 the question arose whether the product known as V.P. Latex which was imported by the appellant can be considered to be `rubber raw' within the meaning of Tariff Entry No. 87 of the Indian Tariff Act, 1934. The choice was between classifying V.P. Latex as `rubber raw' and the general residuary entry at the end of the Tariff (a general catch all entry which was described as "the orphanage of the residuary clause". In these circumstances, this Court applied the commercial meaning or nomenclature test. 39.In the case of Commissioner of Sales Tax, M.P. v. Jaswant Singh Charan Singh 1967 (2) SCR 720 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fitness of the matter of the statute." 41.The Court has also referred to the observation of Fry, J in Holt & Co. v. Collyer [1881] 16 Ch. D. 718, 720. The observation is : "If it is a word which is of a technical or scientific character then it must be construed according to that which is its primary meaning, namely, its technical or scientific meaning". Referring to the above decisions this Court held that :- "While construing the word `coal' in Entry I of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and consumers purchasing it as fuel would give to that word. A sales tax statute is being one levying a tax on goods must in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance". 42.This Court in K.V. Varkey v. Agricultural Income Tax and Rural Sales Tax Officer 1954 (5) STC 384 specifically declined to apply the popular or commercial meaning of `Tea' occurring in the sales tax statute holding that the context of the statute required that the technical meaning of `a product of plant lif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e importer had imported skimmed milk powder and relied upon the principle of commercial nomenclature or trade understanding in order to contend that there was a settled and accepted distinction between milk powder and skimmed milk powder which was specifically recognised and accepted by this Court in Healthways Dairy v. State of Haryana. The Special Bench of the Tribunal negatived that contention and held that :- "unlike the Central Excise Tariff the import schedule itself provided a statutory basis of interpretation. The controversy before us relates to a period during which the Imports (Control) Order, 1955, issued under the Imports and Exports (Control) Act, 1947, had a separate import schedule annexed to it. This import schedule was aligned with the import schedule of the Customs Tariff Act, 1975. The import schedule under the Import (Control) Order itself did not contain any rules of interpretation, section notes and chapter notes. However, a statutory Note at the beginning of the import schedule stated that the scope of various terms and headings in it was to be the same as in the import tariff schedule in the Customs Tariff Act, 1975. Thus the elaborate statutory scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial sense or in trade nomenclature so as to bring the same within the restricted Item No. 62 of Appendix-2 of the Import and Export Policy for April 1988-March 1991. We have already stated hereinbefore that in the List of Restricted Items under Item No. 62 only marble has been mentioned and not the other stones including calcareous stone used for building or monumental purposes which have been left out. Therefore, per se it may be difficult to say that marble includes the other calcareous stones mentioned in the ITC Schedule. It is pertinent to mention in this connection the Report of Dr. S.F. Sethna of the Department of Geology, St. Xaviers College, Bombay to whom a sample of the said calcareous slab of stone intended to be imported has been sent. Dr. Sethna, a noted Geologist after examination of the sample specifically stated that the sample under investigation is a sedimentary rock which does not show any sign of metamorphic recrystallization and thus cannot be considered as a marble. The report sent by the exporters of Italy, Elle Marmi and Andree Muciani dated December 6, 1988 also states that all the rough slabs loaded are calcareous stone slabs other than marble. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines. A report has been sent by them to the Superintendent, Central Excise and Customs Division, Udaipur after testing of the sample on March 3, 1989. The said report gives the Technical and Commercial definition of marble as : Technical Definition :- "Geologically (petrologically) marble is recrystallised (metamorphosed) limestone. Ordinary limestone is a sedimentary rock but once it is metamorphosed i.e. once it has undergone recrystallisation, it is turned to marble. So marble is metamorphosed limestone which consist essentially the minerals calcite, dolomite or a combination of the two." Commercial Definition :- "The usage of the term `marble' has a much wider application. In the commercial circle, any limestone which is sufficiently hard and coherent to take a good polish and which can be cut into desired sizes (into blocks) free of cracks can be called `marble'." It has also been stated therein that commercial marble refers to a crystalline rock composed predominantly of one or more of following minerals; calcite, dolomite or serpentine and capable of taking a polish. It has been further stated under the said report that the specimen has been examined and it is observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chitecture." 52.The Appellate Tribunal after considering various reports referred to hereinbefore observed that the term `marble' cannot be construed on geological and petrological consideration, but has to be construed in commercial parlance. It has also been observed that the Tribunal is unable to place reliance on these reports. In commercial circle any limestone which is sufficiently hard and coherent to take good polish and which can be cut into desired size free of cracks can be called as `marble' as per the opinion given by the Indian Bureau of Mines. The Tribunal also observed that the Tribunal has found that the specimen could be termed as `marble' as per the commercial definition but not technically referring to the report of the Director, Mines and Geology Department, Udaipur. It has also been observed by the Tribunal that in the sample re-crystallization has not taken place. The Tribunal has also held that it was not necessary to go into any other aspects in terms of the ISI or technical and scientific definition and held that the impugned goods do fall under marble in trade understanding and as such the same comes within the List of Restricted Items No. 62 of Appendix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dard Institute and not as mentioned in the opinion given by the Indian Bureau of Mines on visual observation and it does not extend to or apply to other calcareous stones mentioned in the ITC Schedule. Moreover, the commercial nomenclature or trade meaning cannot be given to marble in as much as such a meaning if given will render otiose, redundant the terms travertine, ecaussine, alabaster and other calcareous monumental or building stone of an apparent specific gravity of 2.5% or more whether or not roughly trimmed or merely cut by sawing. Moreover, in Appendix 6 i.e. Import of items under Open General Licence, Item No. 1 refers to Raw Materials, components, and consumables (Non-iron an steel items other than those in Appendices 2, 3, Part A, 5 and so the other calcareous stones excluding marble which is a restricted item of import fall within import items under Open General Licence. Although much stress has been laid on the note to Item No. 0.2 of Indian Standards Specification for Marble (Blocks, Slabs and Tiles) wherein it has been stated that sometimes rocks, such as serpentine are also polished and used in trade as marble but it cannot be taken into consideration in coming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, but if, after imposing a rate on houses, buildings, works, tenements and hereditaments, an Act exempted "land", this word would be restricted to land unburdened with houses, buildings or works which would otherwise have been unnecessarily enumerated." 56.As regards the submission that the end-use of a particular item has to be taken into consideration in interpreting product is of no relevance in determining its classification as we have stated hereinbefore that in interpreting a term appearing in the Tariff Item which has not been defined either in the Tariff Schedule or in the Import Control Order, the same is to be interpreted in such a way which is in consonance with the Items specified in the ITC Schedule without leaving out any part of the Items mentioned therein. In other words, a harmonised interpretation has to be given to each of the calcareous stones mentioned in the said Tariff Item in ITC Schedule and nothing should be left out or made redundant in giving the interpretation. The commercial nomenclature or understanding in the trade which is generally given in tax statute can not be taken recourse to in the instant case inasmuch as the statutory context in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported article is marble falling within Entry 62 of Appendix 2, the burden lies on the Customs Department to show that the appellant has acted dishonestly or contumaciously or with the deliberate or distinct object of breaching the law. 58.In the present case, the Tribunal has itself specifically stated that the appellant has acted on the basis of bona fide belief that the goods were importable under OGL and that, therefore, the Appellant deserves lenient treatment. It is, therefore, to be considered whether in the light of this specific finding of the Customs, Excise & Gold (Control) Appellate Tribunal, the penalty and fine in lieu of confiscation required to be set aside and quashed. Moreover, the quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable bearing in mind the bona fides of the Appellant, as specifically found by the Appellate Tribunal. 59.We refer in this connection the decision in Merck Spares v. Collector of Central Excise & Customs, New Delhi - 1983 E.L.T. 1261, Shama Engine Valves Ltd. Bombay v. Collector of Customs, Bombay - 1984 (18) E.L.T. 533 and Madhusudan Gordhandas & Co. v. Collector of Customs, Bombay - 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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