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PETITIONER: THE BRITISH MACHINARY SUPPLIES CO.

       Vs.

RESPONDENT: THE UNION OF INDIA & ORS.

DATE OF JUDGMENT:       06/08/1996

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

CITATION:  JT 1996 (7)   169        1996 SCALE  (5)645

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T THOMAS, J.      This appeal  by special  leave is  in challenge  of and order passed  by the  Government of  India, In  exercise  of their revisional  power under  the Customs  Act,  1962  (for short ’the  Act’). As  per  the  impugned  order  Government annulled the  order passed  by the  appellate  Collector  of Customs in favour of the appellant on 6.12.1978.      Facts are, in brief, these:      Appellant firm  ha a  factory for  manufacturing sewing machines and  accessories at  Faridabad,  with  an  approved capacity for  making both  domestic as  well  as  industrial sewing   machines    Appellant   imports    components   for manufacturing such  sewing machines  from foreign suppliers. In  October,   1977,  appellant   imported   components   of industrial sewing  machines -  "rotating hooks complete with bobbin case", some of which required 1/3 H.P. and the others required  1/2   H.P.  for   their  operation.  According  to appellant such imported components were dutiable at the rate of 40  per cent  to customs duty as per item 84.41(1) of the Customs duty  in  accordance  with  it.  But  the  Assistant Collector of  Customs  (Foreign  Post),  New  Delhi  charged higher duty  by  treating  those  goods  as  components  for domestic sewing  machines as  prescribed under clause (2) of heading 84.2 of the Schedule. Appellant paid the higher duty under protest  and goods  released  and  later  applied  for refund of  the excess  amount paid (i.e. Rs.1,78,208/-). The Assistant Collector  rejected  the  application  reiterating that the  goods imported were components for domestic sewing machines.      Appellant then  filed a  statutory  appeal  before  the Appellate Collector of Custom who allowed the appeal holding that  the  goods  imported  were  not  for  domestic  sewing machines and  as such  they  were  classifiable  under  item 84.41(1) of the Schedule. Thus the appellant became entitled to refund of the amount paid in excess. But appellant failed

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to get  the refund  applied for,  inspite  of  pursuing  the applications filed  for that purpose. So a writ petition was filed in the High Court of Delhi for appropriate directions. Notice was  served on  the Central Government. They proposed to review  the order  for which  a notice  was given  to the appellant to  show   cause why  it should  not be  reviewed. Appellant submitted  its detailed  reply. Central Government after hearing the appellant passed the impugned order.      Appellate collector concurred with the importer’s stand that the  components were  intended  for  industrial  sewing machines on  the strength of a variety of reasons and on its own satisfaction when the difference was demonstrated before him, during  the time  of hearing.  He noticed  that  "  the rotating book  in the  industrial machine  had higher  speed than the  domestic sewing machine and if the rotation pin of the industrial  sewing machines  were to  be attached to the domestic sewing  machines, it  would not withstand the speed and  would   break."  Appellate  Collector,  therefore.  was convinced that  the hooks imported by the appellant were not for  domestic   sewing  machines   and  were   "solely"  and principally for  use in machines operated with more than 1/4 H.P. and as such are classifiable under ICT 84.41(1)".      Government of India differed form the above conclusion, mainly on the premises that (1) "the rotating hooks complete with   bobbin case"  find their  use in  domestic as well as other sewing  machines, but  their  principal  use  lies  in domestic sewing machines, (2) the term sewing machine should have been  understood in  the manner  it  is  understood  in international   market/trade   for   purposes   of   customs classification. and  (3) the  corresponding heading  in  the Brussels Tariff  Nomenclature  (BTN)  covers  tow  types  of sewing machines, namely (a) ordinary sewing machines used in homes or  by  tailors  or  dress-makers  etc..  (b)  special machines which  can be  used only for certain other kinds of sewing (as enumerated therein).      Learned counsel  for the  appellant contended  that the Government of  India have  gone far  beyond  its  powers  in interfering with  a fact finding arrived at by the Appellate Collector  for   which  many   extraneous   materials   were improperly used,  At  any  rate  the  view  adopted  by  the Appellate  Collector   should  have   been  accepted   as  a reasonable  conclusion   on  the  facts.  According  to  the counsel.      Item 84.41  of the  Customs Tariff  Schedule, which was brought into force on 1.1.1977, read thus;      "84.41 Sewing  machines;  furniture      specially   designed   for   sewing      machines; sewing machines needles;      (1) Not elsewhere specified - 40%      (2)  Domestic   sewing  machines  -      100%"      If the  imported components  were for  domestic  sewing machines then  the Central  Government is right in insisting on  the  customs  duty  realised  form  the  appellant.  The language in  which the  item  in  the  schedule  is  couched indicates that  one category  relates to  a specific  specie i.e. "domestic  sewing machines", and the other is a general category i.e.  "not  elsewhere  specified".  Apparently  the burden is  on the  revenue  if  they  want  to  include  the imported  materials   within  the   specific   category   to substantiate that those materials are such.      The very  licence granted  to the  appellant contains a description  which   cannot  normally   be  marginalised  in reaching a  conclusion on  this disputed  aspect. A  list of components to  be imported  during the  licensing period  is

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appended with  the licence.  It starts  with the description that the  components are for industrial sewing machines. The first item  in that  list is  "rotating hooks  complete with bobbin case", which is the component involved in this case.      In  the  letter  of  Credit,  granted  by  the  Foreign Exchange Branch of Syndicate Bank under which the components were imported,  the commodities  are described as components of industrial  sewing  machines.  Learned  counsel  for  the appellant  produced  a  letter  dated  832.1977,  which  was addressed to  the Collector  of Customs  and Central Excise, New Delhi,  by the Central Board of Excise and Customs, copy of which had been forwarded to the subordinate officers. the letter contains a reference to the minutes of the conference of Collectors  of Customs  on tariff classification matters, held in November, 1976. in which the Board of Central Excise and Customs  agreed that  "the ordinary sewing machines used in the  home or  by tailors, dress-markers etc. to be worked by manual  labour or  which require for their operation less than 1/4  H.P. may  continue to  be considered  as  domestic sewing   machines   whereas   industrial   sewing   machines essentially designed  for operation powered by motors of 1/4 H.P. or  more would  fall outside the scope of term domestic sewing machines." Much reliance is sought to be made on this circular. The only conclusion that can be arrived at, if the said circular has any use, is that the imported materials in this case are usable for industrial sewing machines.      Shri  Joseph  Vellapally,  learned  senor  counsel  who argued for the respondents, contended that classification as for tariff  cannot be  determined on  the basis  of what the Collectors of  Central Exercise  & customs  or even what the Board of Central Excise and Customs would have thought about it because  it is legislative process and its interpretation should be  in accordance  with law,  we cannot  overlook the said circular  which is, at least, binding on the department as they have made it known binding on the department as they have made  it known  to all  concerned that  sewing machines covered by motors of 1/4 H.P. or more would fall outside the scope of  the terms  "domestic sewing machines" . It must be borne in  mind that the heading concerned in the tariff i.e. 84.41 uses the expression "domestic sewing machines" and but all the other sewing machines in the residuary category "not elsewhere specified". When customs officials themselves have understood  that  sewing  machines  designed  for  operation powered by  motor of 1/4 H.P. or more would fall outside the scope of  domestic sewing  machines, it  would be  inept  to suggest that  they  should  adopt  a  different  stand  when mulcting the  importer with  duty unless there is a judicial pronouncement on the matter.      Learned  counsel   for  the   respondent  invited   our attention to  a reference made in the universal Encyclopedia of Machines  to a (Vol.I) to the effect that the present day domestic sewing  machines is  usually driven  by an electric motor. Hence  it was contended that a particular horse power for the  motor attached  to the  machines may  or may not be decisive of  the question whether a component is principally used for  domestic sewing  machines. True the horse power is not the only factor to determine it.      Learned  counsel   for  the   respondent  invited   out attention to a decision of this Court in Nat Steel Equipment Private Ltd.  vs. Collector of Central Excise, 1988 (34) ELT 8,  where this Court was concerned with "domestic electrical appliances" mentioned  in explanation  of tariff  Item 33(c) which was  in force  at the  relevant time.  Their Lordships referred to an earlier decision of the Gujarat High Court in Viswa &  Co, vs.  State of  Gujarat (17  STC 581)  in  which

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Bhagwati, J.  (as the  learned Chief  Justice then  was) has observed that  to make  an electrical   appliance a domestic electric appliance  "what is necessary is that it must be of a kind  which is  generally used for household word". But in this case there is no material to show that a sewing machine fitted with the type of components imported by the appellant is generally used in household work.      We find that the observations made by the Special Bench of CEGAT  in Para Engineering Works, New Delhi vs. Collector of  Customs,   New  Delhi,   1987  (27)  ELT  668,  as  more appropriate to  the facts  of  this  case.  A  manufacturer, importing some components of industrial sewing machines with a motor  of 1/4  H.P. had  to approach  the Special Bench as similar question  was raised  by the  custom officials.  The Tribunal noted  that each  Bill of  Entry pertaining  to the import in  that case  contained reference  to  the  invoices which  were   properly  co-related  with  the  bills.  Those documents contain  the description  that the components were for industrial  sewing machines.  Assessment  made  under  a different item  inspite of  such invoices  was  held  to  be unsustainable. The position in this case is almost similar.      From the  above discussion  we come  to the  conclusion that Government  of India  have wrongly exercised revisional powers by  interfering with  the decision  of the  appellate Collector. we, therefore, allow the appeal and set aside the impugned order. There shall be no order as costs.