06 August 1996
Supreme Court
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COLLECTOR OF CUSTOMS, BOMBAY Vs SHIBANI ENGG.SYSTEMS, BOMBAY

Bench: BHARUCHA S.P. (J)
Case number: C.A. No.-000710-000710 / 1993
Diary number: 200120 / 1993
Advocates: P. PARMESWARAN Vs LAKSHMI RAMAN SINGH


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PETITIONER: COLLECTOR OF CUSTOMS, BOMBAY

       Vs.

RESPONDENT: SHIBANI ENGINEERING SYSTEMS,

DATE OF JUDGMENT:       06/08/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) THOMAS K.T. (J)

CITATION:  JT 1996 (7)   222        1996 SCALE  (5)593

ACT:

HEADNOTE:

JUDGMENT:                 THE 6TH DAY OF AUGUST, 1996 Present:           Hon’ble 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                       J U D G M E N T The following Judgment of the Court was delivered: Collector of Customs, Bombay V. Shibani Engineering Systems. Bombay                       J U D G M E N T BHARUCHA. J.      The 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).      The relevant  part of  the Exemption Notification reads thus:      "6. 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.      (b) 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".      The 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

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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.      A 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.      The 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).      The Tribunal found, thus:      "Cups 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". Regarding 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

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before the  Tribunal could not be held to be correct and had to be discarded and the invoice value of the goods.      In  sofar   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.      All 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.      In our view, the Tribunal mis-directed itself. There is not question  of reading  the word "and" disjunctively here. The 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.      Insofar 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.      We are  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 value.      The 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 Notification. He shall  assess the  value of the goods afresh, taking into account the  material placed  before him,  and determine the Customs duty payable thereon.      There shall be no order as to costs.