1993(01)LCX0064

BEFORE THE CEGAT, SPECIAL BENCH `B’, NEW DELHI

Shri P.C. Jain, Member (T) and Ms. Jyoti Balasundaram, Member (J)

SUNEEL COMMUNICATIONS

Versus

COLLECTOR OF CUSTOMS, NEW DELHI

Final Order Nos. C/18 to 21/93-B2, passed on 21-1-1993 in Appeals C.A. Nos. 2286-2287 and 2364-2365/89-B1

Cases Quoted

Lokash Chemical Works v. M.S. Mehta — 1980(04)LCX0010 Eq 1981 (008) ELT 0235 (Bom.)                                                        [Para 5]

Sewpujanrai Indrasanari Ltd. v. Collector — 1958(05)LCX0001 Eq 1983 (013) ELT 1305 (SC)                                                  [Para 5]

Godrej & Boyce Mfg. Co. Pvt. Ltd. v. U.O.I. — 1989(08)LCX0058 Eq 1990 (045) ELT 0536 (Bom.)                                                [Para 5]

Bank of Madura Ltd.v. Collector — 1986(01)LCX0026 Eq 1987 (028) ELT 0396 (Tribunal)                                                           [Para 6]

Prem Rattan & Shadi Lal v. Collector — 1990(04)LCX0006 Eq 1990 (050) ELT 0265 (Tribunal)                                                  [Para 6]

A.B. Controls v. Collector — 1989(07)LCX0049 Eq 1989 (044) ELT 0525 (Tribunal)                                                                        [Para 7]

Bank of Madura v. Collector — 1986(01)LCX0026 Eq 1987 (028) ELT 0396 (Mad.)                                                                       [Para 17]

Prem Rattan v. Collector — 1990(04)LCX0006 Eq 1990 (050) ELT 0265 (Tribunal)                                                                       [Para 17]

Advocated By : S/Shri D.N. Raina and H.A. Ahmadi, Advocates, for the Appellants.

 Shri B.K. Singh, SDR, for the Respondents.

[Order per : Jyoti Balasundaram, Member (J)]. - The above 4 appeals involve identical issues and are hence being heard together and disposed of by a common order.

2. The brief facts of the case are as follows:-

2.1 M/s. Jammu and Kashmir Bank Ltd., Srinagar, filed Bill of Entry Nos. 204864 dated 25-1-1989 (subject matter of C/A/2286/89 and C/A/2365/89) and 214699 dated 10-3-1989 (subject matter of C/A/2287/89 and C/2364/89) on account of M/s. Suneel Communications, for the clearance of goods declared to be telephone parts in SKD condition. The goods, valued at Rs. 10,80,520/- and Rs. 10,92,686/- respectively were imported from M/s. I.P. Electronics, Korea vide invoices dated 15-12-1988 and 23-11-1988. Clearance of the goods was sought in terms of Notification No. 59/88 by virtue of which duty was leviable at the rate of 55% + 45% + CVD nil. On examination of the consignments, parts of cordless telephones were found in place of parts of electronic push button telephones for the manufacture of which Suneel Communications possessed Import Licences for import of certain components as set out in the list attached to the licence. Besides, in the case of the consignment covered by B/E No. 214699, some goods like LED’s screws, washers, stickers, etc. valued at Rs. 1500/- which were not invoiced, were also found. The matter was referred to the Department of Electronics along with samples drawn from the consignments and the Department of Electronics, by letter dated 26-4-1989, confirmed that electronic push button telephones do not cover the category of cordless telephones and that the importers are not licenced to manufacture cordless telephones.

2.2. Show cause notices were issued to the importers proposing confiscation of the goods under Sections 111(d), (m) and (l) of the Customs Act, 1962 on the grounds that the goods are not covered by the import licences, and the benefit of Notification No. 59/88 is not available as goods are not complete telephones in SKD form and hence do not fulfil the conditions stipulated in the Notification and the rate of duty applicable is 100% + 45% + 20% under Heading 851790 Customs Tariff Act, 1975, and, therefore, the goods have been misdeclared with the intent to evade payment of duty to the tune of Rs. 10,15,688 and Rs. 10,30,034 (differential duty) and proposing penal action under Section 12(a). Suneel Communications replied to the show cause notices stating inter alia that the goods imported are kits of push button telephones in SKD condition as per invoice and declaration in the Bill of Entry, that there exists no basis for treating the goods as parts of cordless telephones, that they do not have the technical knowhow to assemble cordless telephones, that the goods are covered by the licence and eligible to concessional rate of duty under Notification No. 59/88 in terms of Sl. Nos. III(5), covering cordless telephones or VI(1) covering telephone instruments.

3. The adjudicating authority upheld the charges contained in the show cause notices, confiscated the goods with an option to redeem on payment of a fine of Rs. 10 lakhs, conditional on production of necessary permission from the Ministry of Telecommunications for manufacture/assembly of cordless telephone within one month from communication of the order failing which order of confiscation was to become absolute, and imposed a penalty of Rs. 1 lakh on Suneel Communications and Rs. 50,000/- on M/s. J & K Bank. Hence these appeals.

4. We have heard Shri D.N. Raina, ld. Counsel for the appellants in C/2286 and 2287/89, Shri Ahmadi, ld. Counsel for the appellants in C/2364 & 2365/89 and Shri B.K. Singh, learned DR for the respondents and carefully considered their submissions.

5. At the outset, Shri Raina submits that what has been imported is push button telephones in SKD form as is clear from the invoice and Bill of Entry which describes the goods as “telephone parts in SKD form populated PCB, Sensor Transducer, Core Flat Cable etc., and the goods are covered by Import Licences. He refers to certain entries in the relevant Import Policies for populated pcb’s, electrical cables, components for telephone instruments i.e. Microphone and ringers, valid for import under cover of licence and submits that the sets imported are covered as per list attached to the licences. In the alternative, he submits that, even assuming without admitting that goods imported are parts of cordless telephones, ”Cordless" telephones are included within the meaning of the expression “push-button” telephones as, in both, dialling is done by push button. He submits that in the light of the industrial licence issued to Suneel Communications for manufacture of the phones, Customs authorities cannot hold that goods have been imported unauthorisedly. He refers to the decision reported in 1980(04)LCX0010 Eq 1981 (008) ELT 0235 (Bom.) to support his contention that licence validity cannot be questioned by Customs authorities. He attacks the conditions attached to redemption on the ground that, once goods are confiscated, Customs authorities cannot proceed further and impose conditions and he cites the decisions reported in 1958(05)LCX0001 Eq 1983 (013) ELT 1305 (S.C.) and 1989(08)LCX0058 Eq 1990 (045) ELT 0536 (Bom.) in this regard. Ld. Counsel submits that the goods have been properly declared as telephones in SKD condition and import licence details also having been declared in the Bill of Entry, the charge of misdeclaration attracting the provisions of Section 111(l) & (m) is not warranted. Lastly, he contends that the benefit of Notification No. 59/88 against Sl. Nos. III(5) or VI(1) is available to the goods, either as “cordless telephones” or “telephone instruments.”

6. Shri H.A. Ahmadi, learned Counsel for Jammu & Kashmir Bank submits that although admittedly the Bill of Entry was filed by the Bank, this was because the Bank had opened a letter of credit in favour of I.P. Electronics Company Limited, Korea on behalf of M/s. Suneel Communications and the goods be imported, namely, parts of electronic push button telephone stood hypotheticated with the Bank by Suneel Communications for realisation of the loan. The Bank only dealt with the documents as Bankers and did not have any relation with the import nor was it concerned with the import. He submits that since no conscious act of commission or omission had been established against the bank, the provisions of Section 112(a) are not attracted so as to give rise to penal action against the Bank. He refers to the decision reported in 1987 (028) ELT 396 and 1990 (050) ELT 265 in support of his plea that penalty cannot be imposed on banking institution in such circumstances. He also submits that the show cause notice dated 3-5-1989 was received only in the last week of May, 1989 and there was not sufficient time for the Bank to prepare the reply thereto before the impugned order came to be passed on 6-6-1989. He, therefore, prays that the penalty imposed on the Bank may be set aside.

7. Shri B.K. Singh, the learned SDR argues that the goods are parts of cordless telephone not covered by the import licence which is for manufacture of end product - electronic push button telephone. He referred to the opinion of the Department of Electronics dated 26-4-1989 in this regard. He drew the attention of the Bench to the examination report in Bill of Entry wherein the goods on examination have been found to be parts of cordless telephone. He also shows us sample of the goods and points out that from the sample it is clear that there is no provision for connecting wire which is a requirement for electronic push button telephone. On the other hand he submits that there is provision for antenna which is required for cordless telephones and not for electronic push button telephones. He refers to paragraph 24(5) of the 1988-1991 policy to submit that the competent authority to issue clarifications regarding electronic items is the Department of Electronics and the clarification is of a binding in nature as has been held by the Tribunal in the case of A.B. Controls v. Collector of Customs [1989 (044) ELT 525]. In response to the arguments of Shri Raina that the goods imported are the same parts which are mentioned in the list attached to the licence, the learned SDR contends that the goods are not covered by the licence as the licence is an actual users’ licence for manufacture of electronic push button telephone and the importers are not actually users for manufacture of cordless telephone, parts of which have been imported in the consignments in dispute. He also submits that the Department has made out a case of mis-declaration as the goods have not been properly declared as parts of cordless telephones. Finally, he submits that the benefit of Notification No. 59/88 is not available to the imported goods as the Notification grants concessional rate of duty to complete telephone instrument and cordless telephone and not to parts thereof.

8. Commenting on the role of the Jammu & Kashmir Bank the learned SDR submits that once the Bank has filed the Bill of Entry it is “importer” within the meaning of Section 2(26) of the Customs Act, 1962 and Section 46, and, therefore, all the consequences of mis-declaration etc. automatically attached to the Bank and, therefore, penalty on the Bank is also justified.

9. In rejoinder Shri Raina submits that nothing turns on the non-declaration of LED’s worth only Rs. 1500/-, as these are only parts of the telephones. He also points out that the findings that convertor (Piezo Electric Ringer) as listed in the list of components attached with the import licence dated 21-2-1988 have not been imported in the consignment which is the subject matter of Customs Appeal No. C/2287/89-B1 is factually incorrect and refers to the invoice dated 23-11-1988 in this regard.

10. The description of the goods covered by bill of entry No. 214699 is :

“SKD Kits for 2500 telephones”

while bill of entry No. 204864 describes the goods covered therein as :

“Telephone Parts in SKD form - Populated PCB, Sensor Transducer, Core Flat Cable etc.”

The invoice in both cases (Invoice No. IP 881123 dated 23-11-1988 in C/2286/89 and Invoice No. IP 881215 dated 15-12-1988 in C/2287/89) describes the goods as under :

The examination report on the bill of entry is as under :

Observations in continuation of examination report (Ref. B/E No. 214699 dated 10-3-1989)

1. These are SKD kits consisting of mounted PCBs, covers fitted with speakers/condensors/leds for cordless telephones marked “Deusious” “Cordless Telephones - Made in Korea”. Model No. 500 “SUNEEL COMMUNICATION LTD”.

2.  INVOICE IS VAGUE - DOES NOT MENTION THE ITEMS CLEARLY

3. INVOICE does not mention screws, Plates Envelopes, stickers, etc.

4. Range for these cordless telephones may be ascertained and P & T’s permission if necessary for such import as also the licence may be seen.

5. Sealed samples of each and every item is put up.

6. Value seems to be very low.

Above observations S. No. 1 to 6 may please be seen before release of this consignment.

11. From the examination report and from the sample that was produced before the Bench during the course of the hearing, it has established that what has been imported is parts of cordless telephones. The imported item contains no provision for connecting wire which is an essential requirement for electronic push button telephone. There is provision for antenna which is an essential requirement for cordless telephone and not for electronic push button telephone. We, therefore, have no hesitation in holding that the goods imported are parts of cordless telephones and not parts of electronic push button telephones.

12. The alternate argument of the learned Counsel that the cordless telephones are included within the meaning of the expression “Push Button Telephones” is also without any force in view of the opinion of the Department of Electronics dated 26-4-1989 to the following effect :

“Letter No. 3(7)/88-DE dated 26-4-1989 from Government of India, Department of Electronics, Lok Nayak Bhawan, New Delhi - 110 003 to Shri K.J. Chaudhary, Asst. Collector of Customs, Office of the Addl. Collector of Customs. Air Cargo Terminal, IGI Airport, New Delhi.

Sub : Clarification on parts for cordless telephones by M/s. Suneel Communication Ltd., Srinagar

This is with reference to your letter No. VIII/12/10/ACU/241/88 dated 31-3-1989 regarding the subject mentioned above. The matter has been examined in this Department and it is to clarify as follows :

1. It is to confirm that Electronic Push Button telephone do not cover the category of Cordless Telephones.

2. Since the party is not licenced to manufacture Cordless Telephones the Import Licence No. 1482611 dated 22-7-1988 issued for import of parts for Electronic Push Button Telephones is not valid for import of parts for Cordless Telephones.

Sealed samples are returned separately please."

The case law cited by the learned Counsel on the issue regarding availability of benefit of notification to an item of machinery performing a particular function and in addition performing other functions is not relevant in the present matter in view of our finding that the cordless telephones are different and distinct from electronic push button telephones.

13. The next argument of the learned Counsel was that the sets imported are covered as per the list attached to the import licence issued to M/s. Suneel Communication Ltd. and, therefore, the import is valid. However, we do not agree. The import licence has been issued to Actual User for end product - Electronic Push Button Telephone. In view of our finding in the earlier paragraph that the parts of cordless telephones have been imported, and not parts of Electronic Push Button Telephones for the parts of which final product, the import licence has been granted, the import cannot be said to be valid. We, therefore, hold that the goods are not covered by the import licence.

14. Further the charge of mis-declaration is also sustainable, in the light of the above discussion.

15. The benefit of Notification 59/88 is also not available to the goods which are parts of cordless telephones as the notification grants concessional rate of duty to complete telephone instruments and cordless telephones and not to parts thereof.

16. Accordingly we uphold the confiscation of the goods. However, we give option to M/s. Suneel Communications to redeem the goods simpliciter on payment of a redemption fine of Rs. 5 lakhs. We also reduce the personal penalty imposed on M/s. Suneel Communications to Rs. 75,000/-.

17. Regarding the penalty imposed upon the other appellant, M/s. J & K Bank Ltd., we agree with the contention of the learned Counsel that the bank only dealt with the documents as bankers and filed bills of entry as the goods were hypothecated with the Bank for realisation of loan advanced by the bank to Suneel Communications. We are satisfied that no conscious act of commission or omission has been established against the bank and, therefore, we are of the view that the provisions of Section 112(a) of the Customs Act, 1962 are not attracted against the bank. The case law cited by the learned Counsel is distinguishable on facts. In the case of Bank of Madura v. Collector of Customs, Madras reported in 1987 (028) ELT 396 the Bank of Madura did not file the bill of entry. In the case of Prem Rattan and Shadi Lal v. Collector of Customs reported in 1990 (050) ELT 265, the financier did not file any bill of entry for the import of the goods. However, in view of our finding that M/s. J & K Bank was not guilty of any act of commission or omission in relation to the import, we set aside the penalty imposed thereon.

18. In the result we hold as follows:

(a) The imported goods are confiscated with an option to redeem the same on payment of a fine of Rs. 5 lakhs.

(b) The personal penalty imposed on M/s. Suneel Communications is reduced to Rs. 75,000/-

(c) The penalty of Rs. 50,000/- imposed upon M/s. J & K Bank is set aside.

19. The appeals are disposed of in the above terms.

Equivalent 1994 (71) ELT 124 (Tribunal)