1963(08)LCX0001

IN THE HIGH COURT AT CALCUTTA

B.N. Banerjee, J.

SREE BHAWANI COTTON MILLS LTD.

Versus

ADDL. COLLECTOR OF CUSTOMS

Matter No. 186 of 1962, decided on 26/7 & 1/8-1963

Cases Quoted

Knitting Machineries Syndicate (I) Pvt. Ltd. v. Collector — Matter No. 198 of 1960
— Agreed with........................................................................................................... [Para 23]

Lakshminarayan Ramnivas v. Collector — Matter No. 169 of 1959 — Agreed with........ [Para 27]

Sir W.G. Armstrong Michell & Co. Ltd. v. The Hotchkiss Ordnance Co. Ltd. — 1987 13 T.L.R. 188
— Referred................................................................................................................... [Para 22]

Advocated By :   Shri B.C. Deb, Advocate, for the Petitioner.

Shri A.C. Mitter, Standing Counsel, for the Respondents.

[Order]. - The petitioner, Sree Bhawani Cotton Mills Ltd., is the owner of a Cotton Mill situate at Abohar, in the State of Punjab. On March 3, 1960, the petitioner company obtained a licence from the Joint Chief Controller of Imports and Exports under the provi­sions of the Imports & Exports (Control) Act, authorising the peti­tioner company to import certain machines and accessories from the United States of America to this country. A relevant portion of the licence is set out below:—

“1.        Country from which consigned:—U.S A.

2.          Quantity & Description of goods :—3-120 less one Saw Gin Plant, four Cotton Seed Delinting Machine with acces­sories.

3.          Approximate value c.i.f. Rupees six lakhs only Rs. 6,00,000/-.

6.          Limiting factor for purpose of clearance through Customs: value

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This licence is granted under the Govt. of India, Ministry of Commerce and Industry, Order No. 17/55 dated the 7th December, issued under Imports and Exports (Control) Act, 1947, (XVIII of 1947) and is without prejudice to the application of any other prohibition or regulation affecting the importation of the goods which may be in force at the time of their arrival.”

On the basis of the aforesaid licence, the petitioner company placed the following order with Messrs. Carver Cotton Gin Company of America, through their Indian agents :

Re. Our Order for Delinting plant, placed with Messrs. Patel Brothers, Delhi, dated 30th May, 1960.

With reference to the above as desired by your representative Messrs. Patel Brothers, Delhi, we give below the full particulars of the equipments that you would ship against our order and request you to confirm the same :

2. The petitioner company states that the total value of the order placed with Messrs. Carver Cotton Gin Company amounted to Rs. 1,64,192.88 np.

3. The goods covered by the said order were shipped from America per ss. ‘Steel Navigator', and the petitioner company received two invoices in respect of the same. In the said invoice the goods were described as follows :

“4. Carver Model P-4-5 Dual Motor 176 - Saw Linters. No. Condensers. Duplex Saw Cylinder Motor Supports and ’V’ Belt Drives for both motors. Less 2-7½ H.P. Motors wiring and Controls.

1. True - Line Gummer with 2 H.P. Built-in-Motor and Drive.

2. Carver Spare Saw Cylinder Complete 100 doz. True-Line Gummer Files.

Spare parts for the above."

4. On arrival of the vessel in Calcutta the petitioner declared the goods in the relative bill of entry as:

"Four Cotton Seed Delinting Machine with accessories and spares".

The goods were assessed by the Customs authorities on the basis of the said bill of entry and, on payment of the duty, the goods were allowed to be cleared and passed out of the Customs control, on October 3, 1960.

5. Thereafter, on August 19, 1961 the office premises of the petitioner company was searched by the officers of the Calcutta Customs and certain documents were seized from the custody of the petitioner. At about the same time, the office of Patel Brothers at Bombay, the representatives of the exporter company, was also searched by the Officers of the Bombay Customs and certain other documents were seized from the custody of the said Patel Brothers.

6. Thereafter, early in February 1962, the petitioner company as also Messrs. Patel Brothers were served with two separate notices, in which it was stated as follows :

"Scrutiny of the seized documents revealed that (00i) the Import Licence No. 553779/60/Bom. dated 3-3-1960 was issued for '3-120 Less one Saw Gin Plant, Four Cotton Seed Delinting Machines with accessories’ (ii) that the invoice and other documents which were produced before the Customs authorities for the clearance of the goods showed that only four Delinting machines were imported together with accessories and spares (iii) that actually M/s. Shree Bhawani Cotton Mills Ltd., had placed order on Messrs. Carver Cotton Gin Co. of U.S.A. for six Delinting machines and that the indent as above was accepted by M/s. Carver Cotton Gin Co. on 10-6-1960 (iv) that M/s. Patel Bros. the indenting agents instructed M/s. Carver Cotton Gin Co. to send the additional two Delinters on completely knocked down condition and to invoice them as spares, so that the fact that two more Delinting machines were being actually imported was not disclosed on the invoice. Relevant copies of the seized correspondence flagged 'A' 'B', 'C' 'D' and 'I' are enclosed herewith. Copy of the statement dated 11-9-1961 of Shree A.V. Patankar is also enclosed in this connection. It appears from what has been stated above that six Delinting machines together with accessories thereto were actually imported in the above consignment and that these were invoiced and declared in such a manner so as not to disclose the importation of six Delinters in the subject consignment. It therefore appears that the two excess Delinting machines and their accessories had been imported without a valid licence in contravention of Section 19 Sea Customs Act and read with Section 3(1) of Imports and Exports (Control) Act and that these were, therefore, liable for confiscation under Section 167(8) Sea Customs Act. The value of these apparently offending goods appears to be Rs. 36,762.48 np. c.i.f. (Approx). As M/s. Shree Bhawani Cotton Mills Ltd. and M/s. Patel Bros, appear to be the persons concerned in the above mentioned unlawful importation, they are hereby requested to show cause within 14 days from the date hereof why penal action should not be taken against them as persons concerned under Section 167(8) Sea Customs Act."

7. I am not concerned, in this Rule, with the notice served upon Patel Brothers, who have not moved this Court against the notice.

8. The petitioner company showed cause in writing on March 5, 1962. In the explanation the petitioner company denied having had imported two extra Delinting machines and contended that what had been imported were merely spare parts and the spare parts were, at one stage, assembled in order to find out whether the spare parts represented all the spares ordered by the petitioner company. The petitioner company also claimed personal hearing at the adjudication proceeding.

9. The respondent Additional Collector of Customs fixed the date of hearing on April 25, 1962. At the said hearing, it is stated that one Mr. A.V. Patankar represented Patel Bros., Messrs. J.K. Tibrewal and D. Singhi, the latter a solicitor of the firm of P.D. Himat Singka & Co., represented the petitioner company. It is alleged that Mr. D. Singhi was engaged by the petitioner company as a lawyer to make submissions on facts and law before the Additional Collector of Customs. The petitioner company makes the grievance that said Mr. Singhi was not allowed to make any submission, on the ground that the name of P.D. Himatsingka & Co. did not stand recorded in the Customs file as representing the petitioner company in their professional capacity as solicitors. The Additional Collector of Customs considered the materials placed before him and came to the following conclusion :—

"In the facts and circumstances of the present case, as determined from the statement of Shri A.V. Patankar, the aforesaid correspondence of which copy was supplied to the said Cotton Mills and the explanation dated 5-3-1962 of the said Mills, I hold that the allegation referred to in paragraph I hereof are established, and that the said Mills are a person concerned in the importation without an Import Trade Control Licence valid for the purpose, and therefore in contravention of restrictions imposed under Section 19 of the Sea Customs Act as read with Section 3(1) of the Imports and Exports (Control) Act, 1947 (as amended) of 2 Delinters worth about Rs. 36,762 /- c.i.f. in excess of four permitted to be imported under the Import Trade Control Licence No. 553779/60/Bom dated 3-3-1960. I, therefore, hold them to be liable for personal penalty under Section 167(8) of the Sea Customs Act as read with Section 3(2) of the Imports & Exports (Control) Act, 1947 (as amended)."

In the view taken the Additional Collector of Customs imposed a personal penalty of Rs. 45,000/- on the petitioner company.

10. Aggrieved by order of imposition of penalty, the petitioner company moved this Court, under Article 226 of the Constitution, praying for a writ of Certiorari for the quashing of the order and for a Writ of Prohibition restraining the respondents from giving effect to the order of penalty and obtained this Rule. The rule was limited to 5 grounds as herein below set out :—

Grounds

(a) The first respondent failed to appreciate that the entirety of the component parts sufficient to make two full and complete delinting machines had not been imported inasmuch as such component parts were ordered without condensers. Such condensers are an essential and important part of the machine.

(b) The first respondent failed to appreciate that for purpose of customs clearance, the limiting factor under the said licence was not quantity, but the value of the goods and that about Rs. 40,000/-of the permitted value under the said licence remained unutilized.

*                                   *                                   *

(e) The said purported order is vitiated by the fundamental fallacy that a machine manufactured and assembled by the foreign manufacturer with the manufacturers' traditional skill and experience is the same thing as component parts of the same machine manufactured by the manufacturers which have to be assembled in India. The first respondent erred in holding that your petitioner had imported to delinting machines in excess. Your petitioner had in fact imported four machines only and the accessories imported by your petitioner were not and cannot be said to be machines.

(f) The first respondent acted contrary to natural justice is not allowing your petitioner's lawyer, the said Sri Singhi to make submissions on law and on facts at the hearing.

*                     *                        *

(i) For that in any event articles imported having been duly entered in the Custom House appraised and passed out of Customs Control the Customs Authorities had no jurisdiction any further over the same and the entire proceedings were without jurisdiction.

11. Mr. B.C. Deb, learned advocate for the petitioner company, contended, in the first place, that there had been a violation of the principles of natural justice in not allowing Mr. D. Singhi, Solicitor, to argue the case on behalf of the petitioner company. It is not the case of the petitioner company that none of the representatives of the company was heard by the Additional Collector of Customs. Mr. Tibrewal, who was also representing the petitioner company, was not denied opportunities of being heard. The grievance made was that the solicitor engaged by the petitioner company to make submission on facts and law was not allowed to argue. The allegation in this respect is somewhat lacking in particulars. All that is stated in paragraph 12 of the petition is :

“…… The said Sri D. Singhi was instructed by your petitioner as lawyer to make submissions on facts and on law before the adjudicating officer. The said Sri Singhi was, however, not allowed by the said officer to make any submission on the ground that the name of Messrs. P.D. Himatsingka & Co, was not recorded on Customs files as your petitioner's solicitors."

It is significant that no objection to the attitude taken up by the respondent Additional Collector of Customs was recorded then and there. This objection was raised for the first time on May, 14, l962, after the passing of the penal order dated May, 3, 1962. The relevant portion from the letter, dated May 14, 1962, written by the petitioner company to the Additional Collector of Customs is set out below :-

"…… While on the subject, we may mention that at the personal hearing on the 25th April, 1962, Mr. D. Singhi of Messrs. P.D. Himatsinghka & Co. our Solicitors, was not allowed to participate in the hearing on the ground that the said firm of solicitors were not recorded as our solicitors on your file".

12. Be that as it may, it appears from the affidavit-in-opposition affirmed by Sachhidananda Banerjee, Assistant Collector of Customs and Superintendent, Preventive Service, as follow :

“…… do not admit that Shri D. Singhi was instructed by the petitioner as lawyer to make submissions at the hearing on 25th April, 1962 as alleged. The contention was that the said D Singhi was the representative of Messrs P.D Himatsingka a firm of Solicitors, in Calcutta. No Vakalatnama was, however filed empowering the said Messrs. P.D. Himatsingka & Co. or the said D. Singhi, to appear or plead on behalf of the petitioner at the said personal hearing of on any earlier occasion. The said D. Singhi was, however, allowed to be present, and he was in fact present, during the whole time that the personal hearing lasted. A.V. Patankar on behalf of Patel Bros. and J.K. Tibrewal on behalf of the petitioner were however allowed to make their submissions but they did not desire to add anything further to their respective replies or explanation to the show cause notice."

In view of what is stated above I proceed on the basis that Mr. D. Singhi attended the hearing before the Additional Collector of Customs for the purpose of making submissions on law and on facts on behalf of the petitioner company but that he neither filed a Vakalatnama nor any power executed by the petitioner company from which the Additional Collector of Customs could be satisfied that Mr. Singhi had been authorized to represent the petitioner company and to make submissions on its behalf.

13. It is not the law that a lawyer need not file a Vakalatnama before the Customs authorities. Schedule 2, Art. 10 of the Court Fees Act provides as follows :—

14. Mr. R.C. Deb, however, contended that a pleader, an advocate or a solicitor may file a vakalatnama before a Customs authority and if he does, then that document must bear a Court Fee stamp of Re. 1/-. He, however, argued that it was not obligatory for a lawyer to file a Vakalatnama before an administrative tribunal, like a Customs Adju­dicator, in the absence of any provision as in Order III, rule 4 of the Code of Procedure, which was applicable only in respect of appointment of pleaders, before a Court of law.

15. Mr. A.C. Mitter, learned Standing Counsel appearing for the respondents, does not dispute the proposition that a lawyer duly authorised may represent a party before the Customs Authorities without filing a vakalatnama, but some sort of an authorisation must be there in order to satisfy the Customs authorities that the lawyer had been really authorised to represent that party. Mr. Mitter pointed out that Mr. Singhi had neither a vakalatnama nor even a letter of authorisation enabling him to appear and make submissions on behalf of the petitioner company. In these circumstances, he contended that the Additional Collector of Customs was not obliged to hear Mr. Singhi on behalf of the petitioner company.

16.  In my opinion, the argument made by Mr. Deb should not succeed. In the first place, there was nothing to show that Mr. Singhi of Messrs. P.D. Himatsingka & Co. had been authorised to represent the petitioner company before the Customs authorities. In the next place, Mr. Tibrewal, also a representative of the petitioner company was given an opportunity of personal hearing before the Additional Collector of Customs. The mere fact that the Additional Collector of Customs did not hear Mr. Singhi, who had no authority in writing, does not vitiate the entire adjudication proceedings. It is no rule of natural justice that where a party proceeded against is represented by more than one representative, hearing must be given to all the representatives. I, therefore, do not make much of the first branch of the argument of Mr. Deb.

17.  Mr. Deb contended, in the next place, that the licence authorised the petitioner to import four delinting machines as well as accessories; there was no limit, excepting as to the money value of the licence, placed on the quantity of accessories to be imported. If, in these circumstances, the petitioner company imported accessories sufficient to make two extra complete delinting machines but nevertheless remained within the limits of the money value as granted by the licence, Mr. Deb contended, no offence either under the Sea Customs Act or under the Imports & Exports (Control) Act was committed.

18. Component parts of machinery and apparatus, as defined in item 72(3) of the First Schedule of the Indian Customs Tariff (Fifty-first issue), are :

"Component parts of machinery as defined in Item Nos. 72, 72(1) and 72(2) and not otherwise specified, namely, such parts only as are essential for the working of the machine or apparatus and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose but excluding small tools, like twist drills and reamers dies and teps, gear cutters and hacksaw blades : Provided that articles which do not satisfy this condition shall also be deemed to be component parts of the machine to which they belong if they are essential to its operation and are imported with it is such quantities as may appear to the Collector of Customs to be reasonable".

Ad valorem duty payable on component parts is now 20 per cent.

19. Component parts are therefore not the machine itself but only such parts thereof as are essential for the working of the machine.

20. In Websters New Twentieth Century Dictionary one of the meanings ascribed to the word 'accessory' is :

"A non-essential device added to a principal body for effective ness or convenience; as a speedometer in an automobile".

21. In Murray's New English dictionary an accessory is said to be “something contributing in a subordinate degree to a general result or effect; an adjunct, or accompaniment."

22. In an old English case decided as far back as 1897 the Court of Appeal consisting of Lord Esher, M.R., Lopes and Chitty, L. JJ. had to consider the question whether duplicate parts of a gun were accessories' or 'stores'. Their lordships expressed the opinion that parts of the gun were not accessories to the gun vide Sir W.G. Armstrong Michell & Co. Ltd. v. The Hotchkiss Ordnance Co. Ltd. (1897) 13 T.L.R. 188. The above judgment goes to show that parts of an apparatus are not necessarily accessories thereto but accessories are such gadgets as in a subordinate degree contribute to the general result and effect of the apparatus.

23. In my opinion, the word ‘accessory' may mean either devices which add to the effectiveness or the convenience of the machine or non-essential devices added to the principal body of the machine which enhance the convenient working of the machine. A reasonable quantity of accessories may be imported along with the machine under the licence. It is not, however, permissible to import complete sets of machine in a dismantled condition over and above the number of machines licenced to be imported, under the plea that the unassembled parts of extra machine must be deemed to be accessories or extra component parts of the machine purported to be imported under the licence. A similar view was expressed by Sinha, J. in matter No 198 of 1960 Messrs. Knitting Machineries Syndicate (India) Pvt. Ltd. v. The Collector of Customs. I respectfully agree with the views expressed by Sinha J.

24. Mr. Deb further contended that the Customs authorities were wrong in thinking that the accessories imported by the petitioner company represented dismantled parts of complete sets of extra machines because the imported accessories did not include condensers which were essential parts of a Delinting machine. I cannot make much of this argument for two reasons. In the first place, it does not appear whether a condenser is an essential part of Delinting machines. In the next place, complete sets of machinery imported under the licence, were also ordered without a condenser, which may indicate that a condenser need not be an essential gadget to the type of Delinting machine imported.

25. Mr. Deb also contended that there was a good deal of difference between a machine manufactured and assembled by the manufacturer and parts of such machine imported in an unassembled condition and that the Customs authorities were wrong in thinking that the unassembled parts of the machine should be treated as a complete machine. I am not satisfied with this branch of the argument, which places undue importance on the assembling of a machine in the country of its origin. If the parts are capable of being made into a whole, then whether they are so made in the country of their origin or in the country where they are imported makes little difference.

26. Mr. Deb further argued that the 4 machines and the accessories imported therewith did not exceed the limit of the value permitted by the licence and, therefore, the petitioner company should not be deemed to have offended against the provisions of the licence. In my opinion, there is no substance in this argument. The value of the goods was not the only limitation placed under the licence; the petitioner company was not permitted to import anything else but the permitted number and type of machine and its accessories under the licence. Since the petitioner company imported more machines than the licence permitted, the fact that it kept within the monetary limits of the licence did not absolve itself.

27. It was lastly argued by Mr. Deb that the goods passed out of the Customs barrier and thereafter the Customs authorities could not pursue the goods and impose penalty upon the petitioner. This point has already been dealt with by Sinha, J in matter No. 169 of 1959 Lakshminarayan Ramnivas v. Collector of Customs and in His Lordship's opinion the Customs authorities are entitled to impose penalty even after the goods pass out of the customs' barrier. I respectfully agree with the view expressed by His Lordship and for that reason I repel this branch of the argument.

28. All the arguments advanced by Mr. Deb therefore, fail. This rule is discharged.

Equivalent 2000 (125) ELT 13 (Cal.)