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PETITIONER: COLLECTOR OF CUSTOMS

       Vs.

RESPONDENT: RELIANCE INDUSTRIES I ,TD.

DATE OF JUDGMENT:       07/12/1999

BENCH: S.P.Bharucha, R.C.Lahoti, N.Santosh Hegde,

JUDGMENT:

Santosh Hegde J.

     This  is an appeal under Section 130-E of the  Customs Act,  1962  preferred  by the Collector of  Customs,  Bombay against  an  order of the Customs, Excise &  Gold  (Control) Appellate Tribunal, New Delhi, (for short ’the CEGAT’) dated 29.9.1995.   Brief  facts required to be considered in  this appeal arc as follows:

     M/s.   Reliance Industries, the respondent herein, was granted  a letter of intent dated 4.12.1980 for  manufacture of  Polyester Filament Yam (PFY) with an actual capacity  of 10,000   metric   tons  at   their  plant   at   Patalganga, Maharashtra.   This  letter of intent was converted into  an industrial licence on 17.8.1981 and the capacity referred to above  was enhanced to 25,125 metric tons in November, 1984. They  were also issued 5 import licences for importation  of machinery  specified  in  the  list  appended  to  the  said licence.   Based on the said import licence, the  respondent imported  23 items of machinery as enumerated in the list of goods attached to the import licence.

     It  is seen from the records that on a visit by a team of  Customs Officers to the respondent’s plant at Patalganga on 23.12.1986 and 26.12.1986, they noticed certain machinery which  in  their opinion was imported by the  respondent  in contravention/mis-declaration  of the import licence granted to  them.  Hence, a notice dated 10.2.1987 calling upon  the respondent to show cause was issued on the following grounds

     (a)  Why the entire PFY plant installed at  Patalganga by  misdeclaration of more than twice the declared  licensed capacity  unauthorisedly  imported  by them, should  not  be confiscated  under  Section  11 l(d) and as to  why  penalty should  not  be  imposed on them under Section  112  of  the Customs Act, 1962;

     (b)  Why  the four additional spinning  machine  lines with 32 positions having 8 ends per position, unauthorisedly imported  and  installed at the PFY plant in  Patalganga  by mis-declaration,  should  not  be deemed  confiscable  under Section  III of the Customs Act, 1962 and why penalty should not  be imposed upon M/s.  RIL under Section 112 of the said Act;

     (c)  Why the differential duty not paid to the  extent

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of  Rs.   74,34,10,211.58 should not be recovered from  M/s. RIL  on account of final assessment on merits of the  entire PFY  Project  under 84.59(2) as projects were registered  by misdeclaration and intent to evade duty;

     (d)Why  the  customs  duty of  Rs.45,30,36,344.22  not declared  at the time of import for assessment should not be recovered  on the 4 additional machine lines from M/s.   RIL and

     (e) Why in respect of © and (d) above done with intent to  evade  duty  the  plant  should  not  be  deemed  to  be confiscable  under  Section l1l(m) and (1) and  why  penally should not be leviable on M/s.  RIL under Section 112 of the Customs Act, 1962.

     The  respondent sent its reply to the said show  cause notice and sought personal hearing before the Collector.  In the interregnum, certain other proceedings before the Bombay High  Court and this Court were initiated by the respondent; reference to which is not necessary for the disposal of this appeal.

     After  considering the documentary evidence  available on  record  and  hearing the arguments of the  parties,  the Collector  framed the following issues for his consideration ’.-

     "(a)  Preliminary points and legal submissions made on behalf of the importer;

     (b) Issue relating to the allegations regarding import of machinery, equipments etc.  of a higher capacity i.e.  in brief, the charge (a) in para 26 of the show cause notice:

     Â©          Issue  relating  to   the   allegation   regarding unauthorised  import of 4 additional spinning machine  lines with   32   positions  having  8  ends  per  position   i.e. allegation (b) in para 26 of the Show Cause Notice;

     (d)  Issue relating to the valuation of the PFY  Plant at  Patalganga  i.e.   allegation © in Para 26 of  the Show Cause’  Notice;   (e)  Issue relating to the  valuation  and assessment  of  duty or the 4 additional  spinning  machines vide  allegations  made  in  Para 26(d) of  the  Show  Cause Notice;

     (t)  Issue  relating to the confiscation of the  plant and   imposition  of  penally  in  respect  of   allegations contained in (e) of Para 26 of the Show Cause Notice;

     (g) Related issues, if any, which may flow from any of the  above allegations or evidence noticed in the course  of the   adjudication  proceedings  which   are  relevant   for finalisation of the provisional assessment in respect of the 3 contracts registered by the importer."

     He  rejected  the  contention of the  respondent  that either  there was any violation of the principles of natural justice  in  the investigation made by the appellant or  the defence  of the respondent was, in any way, impaired by  not making  available  the  concerned  bills  of  entry  to  the respondent.   The  plea of the respondent in regard  to  the maintainability of the show cause

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     notice  for  want  of  jurisdiction  to  finalise  the assessment  under  Section 124 of the Customs Act  was  also rejected.   In regard to the allegation pertaining to the  4 additional  spinning  machines,  he came to  the  conclusion after  considering the material that was placed before  him, that  the relevant import licence allowed the respondent  to import  4 complete spinning machines in terms of Item A-4 of the  list  attached  to  the licence and that  the  list  of equipments  authorised lor import under Item A-5 also  would go  to make additional 4 spinning machines.  Accordingly, he held  that the charges contained in sub-paras (b), (c),  (d) and  (e)  of  Para  26 of the show cause  notice  cannot  be sustained.   Consequently, he held that the intended levy of penalty  under  Section 112 of the Act in terms of Para  26, sub-para  (e) relating to additional spinning machines could not be sustained.

     As  against the allegation regarding excess  capacity, he  came  to  the conclusion that the actual  production  in absolute  terms achieved by the respondent had not  exceeded the  plant capacity.  In the light of the above finding,  he directed  that  the  value of the Screw Pump Motor  and  the Booster  Pump Motor be appraised by the Assistant  Collector of Customs in charge of

     the  Project  Import  Cell and evaluate the  same  and directed  that the value so appraised should form the  basis of  the  duty assessment at the project contract rate  under Heading  84.66 CTA 1975.  He further directed that the value of  dismantling  charges amounting to US $ 1.55  million  be added  to  the  assessable  value of  the  last  consignment imported  as  part of the reconditioned equipment under  the C.G.   Licence 2970355 dated 29.11.1984 under Heading  84.66 CTA, 1975.

     Being  aggrieved  by the said order of the  Collector, both  the  appellant  as well as  the  respondent  preferred appeals,  as  stated above, before tlie CEGAT which  by  its order  dated 29.9.1995 upheld the finding of the  Collector, holding that there is no evidence in the case that the plant and  machinery  and the equipments imported  were  different from  what had been licensed.  It also held that the  charge has  been framed only because the production arrived at  was nearly  the  double  the  licensed   capacity  and  as   the respondent  had  satisfactorily explained this  position  in regard  to the production, the CEGAT rejected the contention of  the  appellant-collector  in  regard to  the  charge  of misdeclaration with intent to evade duty and

     unauthorised import of goods in excess of the licensed quantity.   The  appeal  of the respondent also came  to  be dismissed.

     As  stated  above,  the Department has  preferred  the above appeal against the said order of the CEGAT, confirming the  order  of  the  Collector.    The  respondent  who  was aggrieved with certain directions issued by the Collector as confirmed  by the CEGAT had preferred separate appeals which have  been  since heard and dismissed by this Court  vide  a separate  order dated 17.11.1999.  In this appeal, on behalf of  the appellant, it was argued that the authoriities below failed  to take into consideration the admitted tact that by virtue  of the import made by the respondent which according to  the  Department, was by misdeclaration,  respondent  was able to increase the production capacity much more than what

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would  have  been possible if the import was  in  accordance with  the terms of the licence.  That fact itself  according to the Department, was conclusive of the allegation that the respondent  had imported machinery which were, in fact,  not permitted  under  the  licence granted to  them.   In  other words,  the respondent contends before us that the  tribunal and  the  Collector failed to notice the  logical  inference that   what  was  permitted  under   the  licence  was   the importation   of  such  machinery  as  was  necessary’   for achieving  the sanctioned production but the respondent  has imported  machinery for production of PFY much in excess  of the  sanctioned  production.   Therefore, the import  is  in contravention of the licence.

     We  have perused the order of the Collector as well as that  of the CEGAT and have heard the arguments advanced  on behalf  of  the parties.  It is to be seen that  before  the Collector  pursuant to the show cause notice issued both the parties  have produced large number of documents both in the form  of affidavits and correspondence which have been dealt with by the Collector in his order.  After considering these materials  with reference to the question that is before  us for consideration, the Collector came to the conclusion that the relevant import licence allowed the import of 4 complete spinning machines in terms of Item 4 of the list attached to the  licence  of equipments authorised for  import.   Hence, according  to  him,  there  was  no  misdeclaration  by  the respondent in regard to the import of machinery and what was imported  was  in accordance with the list appended  to  the import licence.

     In  its  order,  the CEGAT has also dealt  with  these questions  independently  and noticed the arguments  of  the Department  that the machinery enumerated at serial No.4  in the  list  attached  to the licence, covered  only  spinning frame  and  not complete spinning machines.  After  noticing this  argument, it look into consideration the evidence that was  adduced by the Department in support of its  contention and also those produced on behalf of the respondent and came to  the  conclusion  that there is no reason  whatsoever  to disagree  with  the  finding  of  fact  arrived  at  by  the Collector.   In  this background, it is for us  to  consider whether  the  Department in this appeal has made out a  case which  calls for interference by this Court with the  orders passed  by the authorities below.  The question whether  the machinery  imported by the respondent pursuant to the import licence  granted  to it is in accordance with the  terms  of import  licence  granted or not, is primarily a question  of tact  that is for the fact-finding authorities below and the Tribunal  to decide.  Their decision on technical matters as to  what  could  be  imported and  what  was  imported  must prevail.   The  authorities  below and the  Tribunal,  after considering  the  case of the Department as well as that  of the  respondent  and  taking into consideration  the  entire material,  concurrently  arrived at the conclusion that  the importation  in question was in conformity with the terms of import  licence.   The  argument of the Department  that  an adverse  inference  in regard to the legality of the  import should be drawn, ilself based on certain inferences like the excess  production by the respondent, was considered and for reasons  recorded  not accepted, and we are not inclined  to disagree with the same.  The question as to the jurisdiction of   an  authority  in  deciding  as  to  the  legality   of importation  based on the description of the goods  imported is  well-settled.  This Court in the case of Union of  India

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v.   Tara Chand Gupta & Bros.  (1971 (3) SCR 557 at 566) has held in this context thus :

     "The  resuit is that when the Collector examines goods imported  under  a  licence in respect of goods  covered  by entry  295 what he has to ascertain is whether the goods are parts  and  accessories, and not whether the  goods,  though parts  and  accessories,  are so comprehensive that  if  put together  would  constitute  motor cycles  and  scooters  in C.K.D.   condition.   Were he 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, in other words, be in non-compliance of entry 295."

     The  principles laid down in the above case are  fully applicable  to the facts of this case also.  The authorities below  have  taken  note of this principle of law  and  have applied  the  same to the facts in the instant case.  We  do not  find any reason to interfere with this finding of fact. Hence,  this  appeal  fails and the same is  dismissed.   No costs.