1994(07)LCX0003

IN THE CEGAT, SPECIAL BENCH ‘B’, NEW DELHI

Shri S.K. Bhatnagar, Vice-President and Ms. Jyoti Balasundaram, Member (J)

[Third Member on reference : Shri Harish Chander, President]

TWENTY FIRST CENTURY PRINTERS

Versus

COLLECTOR OF CUSTOMS, BOMBAY

Final Order No. C/55/94-B2 with Misc. Order No. C/70/93-B2, dated 29-7-1994 in Appeal No. C/103/92-B2

CASES CITED

Andhra Patrika v. Collector — 1983(05)LCX0024 Eq 1983 (013) ELT 1103 (Tribunal) — Relied on........... [Paras 11, 23]

Aravali Forgings Ltd. v. Collector — 1993(08)LCX0095 Eq 1994 (070) ELT 0693 (Tribunal) — Referred............ [Para 52]

Associated Millers Pvt. Ltd. v. Collector — 1990(07)LCX0089 Eq 1990 (050) ELT 0633 (Tribunal)  — Referred [Paras 11, 49, 52]

Bharat Forge & Press Industries Ltd. v. Collector — 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (S.C.) — Referred [Para 52]

Collector v. Blue Star Ltd. — 1990(03)LCX0047 Eq 1990 (050) ELT 0186 (Tribunal) — Relied on............. [Paras 11, 23.1]

Collector v. O.E.N. India Ltd. — 1987(10)LCX0061 Eq 1989 (042) ELT 0235 (Tribunal) — Referred................... [Para 50]

Consolidated Petrotech Industries Ltd. v. Collector — 1991(05)LCX0011 Eq 1992 (057) ELT 0081 (Tribunal) — Referred [Para 52]

Escorts Ltd. v. Collector — 1989(11)LCX0013 Eq 1990 (047) ELT 0068 (Tribunal) — Relied on......................... [Para 23.2]

Jain Engg. Co. v. Collector — 1987(09)LCX0020 Eq 1987 (032) ELT 0003 (S.C.) — Referred.................................... [Para 11]

Modern Food Industries Ltd. v. Collector — 1990(11)LCX0016 Eq 1991 (053) ELT 0107 (Tribunal) — Referred [Para 11]

Rajasthan Synthetics Industries Ltd. v. Collector — 1989(03)LCX0012 Eq 1989 (042) ELT 0024 (Tribunal)  — Referred [Para 52]

Subhash Photographics v. U.O.I. — 1993(05)LCX0029 Eq 1993 (066) ELT 0003 (S.C.) — Referred......................... [Para 52]

U.O.I. v. Wood Papers Ltd. — 1990(04)LCX0075 Eq 1990 (047) ELT 0500 (S.C.) — Referred............................. [Para 11]

Zupiter Printery v. U.O.I. — 1991 (34) ECR 7 (Del.) — Relied on............................... [Paras 20, 43]

Advocated By : Shri K. Srinivasan, Consultant, for the Appellant.

Shri S.K. Sharma, DR, for the Respondent.

[Order per : Jyoti Balasundaram, Member (J)]. - Aggrieved by the Order dated 25-10-91 of the Collector of Customs (Judicial), Bombay up-holding confiscation of Web-fed High Speed Letter and Off-Set Rotary Printing Machine having out-put of more than 35,000 composite impressions or copies per hour with DCP Platen under clauses (d) and (m) of Section 111 of the Customs Act, 1962, imposing a fine in lieu of confiscation of Rs. 60,00,000/- and determination the classification of the machine under Heading 84.79 of the First Schedule to the Customs Tariff Act, 1975 and denial of benefit of Notification No. 114/80-Cus., dated 19-6-1980 and imposition of penalty of Rs. 10,00,000/- on the appellants under Section 112, the appellants have referred the above appeal.

2. The appellants hold a registration dated November 30, 1987 from the Ministry of Industry, Deptt. of Industrial Development. The said Registration Certificate specifies the article of manufacture as ‘Multi-Colour Off-Set Printing and Automatic Punching’ and the annual capacity is 9,60,00,000 impressions.

3. The appellants decided to import 1 No. Chambon Web-fed Off-set Rotary Printing Machine having the following configuration :

(1)     Automatic non-stop unwind, type Monomatic MDC 155.

(2)     Variable speed intermediate pull through appliance.

(3)     Web off-set printing appliance with DCP.

(4)     Infra red dryer.

(5)     Cutting units.

(6)     DCP Platen Cutter/Creaser.

(7)     A complete set of electronic equipments and control panel.

The aforesaid configuration was decided on the basis of the techno-economic feasibility report prepared by their consultant covering various fields like project concept, market analysis, plant and machinery and process, raw material, utility and services etc. The project concept was to set up a project for undertaking multi-colour printing and production of catalogues, advertising and packaging material, video cassette covers, record sleeves etc. The project is located at Silvassa, Dadra and Nagar Haveli.

In para 2.3 of the techno-economic feasibility report the type of equipment that needs to be installed to meet the developing trend in the country is considered and it is stated :-

“Accordingly, this ‘in-line’ installation, for the multi-colour printing and manufacture of cartons has been considered. Presently this sophisticated facility is not available with any converter in India. In this installation, in one single operation the board/paper in rool form will be printed in multi-colour, cut and creased with the trim waster extracted pneumatically. Electronic, computerised register controls between print to print units and printing to cutting/creasing units with high level of accuracy will ensure lower spoilage due to misregister. Spoilage reduction by 3 to 4% is possible, compared to conventional, existing sheet-fed installations, purely from the point of inherent process difference. Sheeting costs are also eliminated. Sheet fed process pays an up charge ranging from 10% to 20% on sheeting/trimming loss of material and running cost.

Execution of any given job in this process would be much faster compared to conventional sheet fed operation, which operates in stages.

This equipment fitted with infra-red and electrical heating system, would also provide facilities to print non-absorbent poly-coated and foil-laminated board. This element would further increase the scope of wide-range, sophisticated product execution which presently is a bottleneck with leading converters”.

Printing of catalogues and advertising materials do not require any cutting or creasing process; for the purpose of manufacture of multi-colour printed varnished blanks and conventional packaging material such as a process would be required. The appellants proposed to manufacture among other things, multi-colour printed varnish blanks which are known as cigarette shell blanks which are known as cigarette shell blanks or carton blank. The DCP platen cutter/creaser cuts a profile of the shell blanks forms the creasing lines along which the shell is folded. The platen cutter/creaser also performs the function of embossing on the shell.

4. Para 2.6 of the study deals with ‘Plant and Machinery and process’ and says :-

“Having decided to go in for an in-line printing conversion equipment with its all round superiority over conventional sheet-fed equipment, the equipment finally selected after scrutinising and evaluating all aspects, is a CHAMBON VO 650 in-line printing and conversion machine.

The ‘CHAMBON’ in-line concept is to start with a reel of board or paper at one end of the machine and to deliver in a single operation, printed, varnished, embossed, cut, creased, stripped and counted printed blanks or reels at the other”.

(The show cause notice which gives the extract of the above para adds ‘cartons’ after ‘blanks’ in the last line, which is erroneous).

The appellants imported the Web-fed off-set rotary printing machine having output of 35,000 composite impressions per hour, manufactured by CHAMBON Ltd., U.K. comprising the aforesaid configuration and presented Bill of Entry Rotation No. 624, dated 15-3-1989 and Line No. 177 for clearance thereof.

5. After the Bill of Entry was filed in the Customs House under Section 46 of the Customs Act, 1962, the same was taken over by the Special Investigation and Intelligence Branch of the Customs House (SIIB), who also got the consignment examined under their supervision. Such examination did not reveal any discrepancy between the imported goods and the declaration made in the entry made under Section 46. The appellants also produced a copy of the techno-economic feasibility report before the Investigating Officer, besides other documents. The SIIB officers searched the premises of the appellants on 15-6-1989 and certain documents were seized. The statement of Shri Debasis Chaudhuri, Director (Technical) of the appellants’ company was recorded by the officers.

The provisional release of goods was granted subject to the following conditions :

(1)     80% duty has to be paid on coating unit, coating appliance, DCP Platen, Waste Stripping unit, Receptacle, 2 Nos. In-feed Device and Re-wind unit.

(2)     Appropriate duty has to be paid on items for which the appellants had not claimed the benefit of Notification No. 114/80.

(3)     On the remaining goods provisional duty of 40% should be paid.

(4)     A.P.D. bond for the difference in duty calculated on the basis of effective rate of duty at 13% and the duty to be paid in terms of 1, 2 and 3 above should be furnished with a bank guarantee.

(5)     An ITC bond for the total CIF value of the goods should be furnished with the bank guarantee of 25% of the CIF value and the appellants accordingly cleared the goods on the aforesaid terms and conditions.

6. A show cause notice, dated 17-12-1990 was issued alleging that the entire configuration machine imported by the appellants was classifiable under Chapter Heading 8479.89 as a machine used for the production of a commodity, namely, printed cartons, by virtue of Note 7 to Chapter 84 of the Customs Act, 1975. It was further alleged that the appellants had deliberately suppressed the facts that the imported complete composite machine was for production of cartons and intentionally misdeclared the goods as a Web-fed Off-set Rotary printing machine having output of 35,000 composite impressions per hour in order to avail the benefit of Notification No. 114/80-Cus. with intent to evade duty as well as circumvent the ITC regulations. It was, therefore, alleged that the goods were liable to confiscation under Section 111 of the Customs Act, 1962 and the appellants liable to a penalty under Section 112 of the Customs Act, 1962. The appellants submitted a reply to the said show cause notice through their Consultant in their letter, dated March 18, 1991. Thereafter the respondent passed the impugned order. Hence this appeal.

7. We have heard Shri K. Srinivasan, learned Consultant and Shri S.K. Sharma, learned DR.

8. Shri K. Srinivasan, the learned Consultant for the appellants submits that there is no dispute that the imported machine is primarily a printing machine as would be evident from page 16 of the impugned order as the Collector has accepted the contention of the appellants that the machinery in question is primarily a printing machine and that even the cigarette shells which are manufactured after cutting and creasing nothing but products of printing industry. Classification under Heading 84.41 has been ruled out on the ground that printing is also the main function of the machine and not merely incidental. However, the Collector has wrongly proceeded on the basis that the machine is an integrated machine and, therefore, has gone into the question as to whether the integrated machine which has a printing press along with the DCP Platen Cutter/Creaser can be treated as a printing machine proper or becomes something different as it is capable of multifarious functions. The learned Consultant contends that once it is accepted that the machine is primarily a printing machinery it will be covered under the OGL entry at Sl. No. 2(22) of Appendix 1 Part B of the 1988-1991 Import-Export Policy which covers “Web-Fed High Speed Off-set Rotary Printing Machine having output of more than 35,000 composite impressions or copies per hour”. He further submits that the import of a machine capable of fulfilling the principal function mentioned in the list of the OGL items cannot be barred merely because of an additional component required for the end-product for the purpose of carrying out a further secondary function. The reference to other entries at Sl. No. 2 of Appendix 1 Part B namely Sl. Nos. 6, 13, 14, 17 and 21 is misconceived as the machines referred to in those Sl. Nos. normally have the specific component whereas the printing machine can have any of the making up machines falling under Heading 84.43 and in fact, as per the Explanatory Notes to the HSN at page 1232 thereof, number of these machines are supplied with printing machines. Therefore, there has been no misdeclaration warranting confiscation of the goods under Section 111(d) of the Customs Act, 1962.

9. On the issue of classification, it is contended that the goods are to be classified under Heading 84.43 as off-set printing machinery and not under Heading 84.79 which is a residual Heading restricted to machinery having independent functions which is (a) not excluded from the Chapter by the operation of any Section Note or Chapter Note, (b) not covered more specifically by a Heading in any other Chapter, and (c) cannot be classified in any other particular Heading of the chapter as no other Heading covers it by reference to its method of function, description or type, or its use or to the industry in which it is employed or it could fall equally well into two or more other such Headings.

Heading 84.79 applies to machines having independent functions. Therefore, even by the Collector’s own finding that the machine is a composite machine, in any event, it would be ruled out from the coverage of Heading 84.79. Heading 84.41 includes other machinery for making up paper pulp, paper or paperboard including cutting machines of all kinds. HSN Explanatory Notes contain an illustrative list of machinery falling under this Heading which includes machines for die-cutting, outlining or grooving paperboard for cartons, boxes, file covers, etc. machines for making folding cartons and boxes. The DCP platen cutter/creases will fall under this Heading. The Explanatory Notes further state that some of the machines under this Heading particularly the box folding machine may be equipped with a printing device and according to Note 3 to Section XVI such machine remains classified under Heading 84.41 provided that printing is not the principal function of the machine. In this case admittedly printing is the principal function. The function of the DCP Platen is to cut the profile of the shell blanks and form the creasing along which they are folded which is a function auxiliary to the printing of the shell blanks. The principal function is printing of the shell blanks with the brand name of the cigarette manufacturers and other essential marketing details (for example, the number of cigarettes). The DCP platen only enables the printed blanks for the shell blanks to be cut and creased to be used further for folding and gumming and provided with the slides to complete cigarette boxes. The adjudicating authority has ruled out classification under Heading 84.43 on the ground that the DCP Platen/cutter/creaser is not specifically stipulated in the Explanatory Notes at page 1239 which states that the printing press could be fitted for making up of units arranged side by side with the printing units so that starting from a single reel of paper complex products like box shapes, labels and railway tickets can be completed in one single continuous operation. The appellants submit that, assuming without admitting that both printing and cutting and creasing are principal functions, even then, classification is to be determined in terms of Interpretative Rule 3(c) of the General Rules for the Interpretation of the Tariff, considering Headings 84.41 and 84.43 and Heading 84.43 being the last in numerical order among those which equally merit consideration, the goods have to be classified under Heading 84.43.

10. Shri Srinivasan’s next submission is that the goods are eligible for the benefit of Notification 114/80-Cus., dated 9-6-1980 at Sl. No. 1 are Web-fed Offset Printing machine having output of 35,000 composite impressions per hour. As there is no dispute that the machine is a printing machine with output exceeding 30,000 copies per hour and falling under Chapter 84, the benefit cannot be denied due to the addition of the DCP Platen cutter/creaser.

11.  As regards penalty, the appellants submit that the goods have been properly declared and the classification has been rightly claimed under Heading 84.43 and, therefore, the question of penalty does not arise as the goods are not liable to confiscation either under Section 111(d) or under 111(m). In support of the various propositions, Shri Srinivasan cited the following cases :

(1)     1990(07)LCX0089 Eq 1990 (050) ELT 0633 (T) = 1991 (32) ECR 461 (CEGAT SB-B2) - Associated Millers Pvt. Ltd. v. Collector of Customs, Madras.

(2)     1983(05)LCX0024 Eq 1983 (013) ELT 1103 (CEGAT) - Andhra Patrika, Madras v. Collector of Customs, Madras.

(3)     1990(11)LCX0016 Eq 1991 (053) ELT 0107 (T) - Modern Food Industries Ltd. v. Collector of Customs.

(4)     1987(09)LCX0020 Eq 1987 (032) ELT 0003 (S.C.) = 1987 (13) ECR 273 SC - Jain Engg. Co. v. Collector of Customs.

(5)     1990(03)LCX0047 Eq 1990 (050) ELT 0186 (T) - Collector of Customs v. Blue Star.

(6)     1990(04)LCX0075 Eq 1990 (047) ELT 0500 (S.C.) - Union of India v. Wood Paper Ltd.

12. In reply Shri S.K. Sharma, the learned Departmental Representative argues that undisputedly the machine is an integrated machine having an offset printing mechanism and also a DCP Platen cutter/creaser, the former for printing wrapper or other material and the latter for cutting and creasing particular packing material like cigarette shells which may be subsequently converted by pasting into empty cigarette packets and the moot question is whether a composite machine can be termed as a printing machine or is different from a mere printing machine press. The techno-economy feasibility report prepared by the importer before importing the machine states that the importers are going to do the work of printing and specialised packaging since these facilities were not available in India. The report prescribes that the process will start with a reel of board or paper at one end of the machine and it will deliver in a single operation printed, varnished, embossed, cut, creased, stripped and counted, printed blanks/ cartons or reel at the other. As per the Explanatory Notes at page 1239, there can be other machines along with a printing machine but the notes do not mention that a composite machine which has a DCP Platen cutter/creaser as an essential component will also be classified under Heading 84.43. In view of the composite nature of the goods resort has to be made to Note 3 to Section XVI which clarifies that the composite machines have to be classified as if consisting of only of that component performing the principal function. Since both printing and cutting/creasing are principal functions, the machine has been rightly assessed under 84.79. He submits that for the same reasons viz. the composite nature of the machine the benefit of the notification has also been denied to the appellants, as the notification is only applicable to Web-fed offset rotary printing machine simpliciter. In the end, he submits that since the machine does not answer to the description at Sl. No. 1 of the Notification 114/80 it will ipso facto not be covered as an OGL item under Sl. No. 2(22) of Appendix 1B of the Import-Export Policy 1988-91. He, therefore, submits that the goods have been rightly confiscated and that penalty has been rightly imposed under Section 112(a) of the Customs Act, 1962.

13. We have considered the submissions of both sides and carefully perused the records. Before giving our findings on the matter, it would be relevant to refer to certain documents such as the invoice and the catalogue of the disputed machinery.

14. The invoice dated 21-1-1989 of Chambon Ltd. describes the goods as Chambon Web-fed Offset Rotary Printing Machine having output of 35,000 composite impressions per hour with the following configuration :-

(a)     Automatic non-stop unwind, type Monomatic MDC 155

(b)     Set of modular cast iron tables, including main drive shaft, gear boxes, guards, etc.

(c)      De-curl appliance

(d)     Web brushing unit

(e)     Anti-static bar

(f)      Web edge guiding device

(g)     Variable speed infeed appliance, type DPTF

(h)     1 x spare geared space

(i)      Variable speed intermediate pull through appliance.

(j)      4 x VO5 Web offset printing appliances with ancillary equipment (lifting tables, etc. and including 1 pair of plate and blanket cylinders)

(k)     Infra-red dryer with cooling roller

(l)      Variable speed intermediate pull through appliance)

(m)    1 x spare geared space

(n)     Coating unit

(o)     UV dryer (frame mounted)

(p)     Variable speed pull through appliance

(q)     An cushion bed mounted turner-bar

(r)      DCP Platen cutter/creaser with inbuilt electronic insetting register control, receptacle and waste removal conveyor

(s)      At 90 degrees to main machine bed, it type 2 spindle rewind

(t)      Complete set of electronic register control equipment for the control of colour to colour print registration

(u)     Complete set of electrical equipment, including main drive motor, control cabinets and machine control console. All inter-unit wiring and cabling supplied.

(v)     One set of essential 2 year’s spares (mechanical, electrical and electronic).

15. The catalogue describes the functions of the various units of the machine. A few samples of the product printed on the imported machine are annexed as Annexure -A.

16. The allegation of the Department is that the appellants have imported a plant for production of printed cartons starting from the raw material - either board or paper. Reliance has been placed upon the catalogue to hold that the entire configuration was meant for “in line printing and converting of folding cartons” and the further charge is that the machine has been misdeclared as a printing machine for the purpose of overcoming ITC prohibition and for evading payment of appropriate customs duty. The working of the machine was explained to us during the course of the hearing by the learned Consultant Shri Srinivasan - the wrappers are printed by the machine in running length while the blanks in the cigarette packing after printing were also subjected to the process of cutting and creasing. Thereafter these cut and creased cigarette blanks are given out on job work for gumming and pasting. This process was earlier explained in the appellant’s reply to the show cause notice. The Platen cutter/creaser does not manufacture cartons in the sense of finished boxes. The DCP Platen incorporating Rotary stripping counted stack reception converts the printed web into finished counted stacks of cartons namely the material for manufacture of boxes in the form of creased sheets. For example a cigarette box containing a slide with a wrapper paper and the shell into which the slide fits and the slide are not manufactured by the machines in question and only the sheets which are printed, cut to size and creased. The process of cutting and creasing as set out in Paras 6 and 7 of reply to the show cause notice which has nowhere been controverted by the Department is as follows :

“6. The process of cutting and creasing is simple. The printed web is fed into the platen at an even, continuous rate and it cuts, creases and embosses after the required length of web material has been drawn. Thus, the continuous progress of the printed web is changed into an intermediate feed of die-cut sheets. These die-cut sheets are ejected on to a roller assembly which transports them to the rotary strip unit, which strips the waste and the stripped sheets are first separated and then deposited on the collector band. An electronic page counter and drop arm mechanism enables the production of counted stacks of such cut, creased sheets.

7. The expression carton is used in the meaning of material from which the shells of cigarette cartons or boxes are made. The finished cigarette boxes as a packaging unit are not made by the DCP platen cutting/creasing machine. This machine only cuts and creases the printed web in the form of sheets which are then to be converted into complete shells, fitted with slides with the wrapper paper subsequently, an operation done by other units and not by my clients.”

17. The issues which arise for determination are :

(a)        correct description of the goods

(b)        ITC angle

(c)        Classification

(d)       Extension of benefit of Notification 114/80-Cus.

(e)        Imposition of penalty.

18. The clear position that emerges is that the machine is not capable of manufacturing cartons or boxes either by folding or otherwise as it has no facility for folding or for gumming and pasting to convert the cut sheets into box shells. Even the Department recognises and admits that the machine is intended for manufacturing packaging material where cutting and creasing is not required as also packaging material where cutting and creasing is required as for the purpose of manufacturing blank cigarette packet shells. As we have held that the machine is not capable of manufacturing fully formed, shaped and gummed box shells with slides, we hold that the machine is nothing but a printing machine. This fact has been accepted by the adjudicating authority at page 16 of the impugned order where he gives a categoric finding that there is absolutely no dispute that the imported machine is a printing machine and that the cigarette shells manufactured after cutting and creasing are nothing but products of the printing industry. In the light of the above discussion, we hold that the appellants have not misdeclared the goods. The reference by the Collector to other entries at Sl. No. 2 of Appendix I Part namely Sl. Nos. 6, 13, 14, 17 and 21 is out of context and misconceived as the machines referred to in those Sl. Nos. normally have the specific component whereas the printing machine can have any of the making up machines falling under Heading 84.43 and, even according to the Explanatory Notes to HSN at page 1232 a number of these machines are supplied with printing machines. For example Sl. No. 6 includes Electronic Colour Scanners with or without chromograph; Sl. No. 13 covers light sources for cameras and plate making with or without built-in vacuum printing frames; Sl. No. 14 covers mechanical hot metal live casting machine with built-in or separate key boards and Sl. No. 21 covers ticket and label printing machine with built-in attachment for numbering and performation. As HSN Explanatory Notes clarify that printing machines can have any of the making up machines falling under Heading 84.43, the absence of the expression “with or without inbuilt mechanism like cutting and creasing devices” in Sl. No. 2(22) will not take the imported goods out of the coverage of that entry. Hence the goods are covered by Sl. No. 2(22) of Appendix I Part B of the Import-Export Policy 1988-91 and thus not liable to confiscation under Section 111(d) and (m) of the Customs Act. We accordingly set aside the confiscation of the machine and the penalty imposed for contravention of Section 111(d) and (m) of the Customs Act, 1962.

19. As regards classification, the rival entries are Headings 84.43 and 84.79 of the Schedule to the Customs Tariff Act, 1975. The adjudicating authority has ruled out classification under Heading 84.41 on the reasoning that printing is also the main function of the machine. The basis for classification by the Department under Heading 84.79 is two principal functions of the machine i.e. printing and cutting and creasing. However, we have already held in the preceding paragraph that the principal function of the machine is to produce printed blanks or reels with the brand name, manufacturers name and any other illustration/legend. Our view is further strengthened by the techno-economic feasibility report prepared for the appellants. In para 2.3 of the report the type of the equipment to be installed to meet the developing tends in India is considered and it is stated as follows in Paras 16 to 21 of the reply to the show cause notice :

16.      In para 2.3 the type of equipment that needs to be installed to meet the developing trends in the country is considered and it is stated :

“Accordingly, this ‘in-line’ installation, for the multi-colour printing and manufacture of cartons has been considered. Presently this sophisticated facility is not available with any converter in India.

In this installation, in one single operation the board/paper in reel form will be printed in multi-colour, cut and creased with the trim waster extracted pneumatically. Electronic, computerised register controls between print to print units and printing to cutting/creasing units with high level of accuracy will ensure lower spoilage due to mis-register. Spoilage reduction by 3 to 4% is possible compared to conventional existing sheet-fed installations, purely from the point of inherent process difference. Sheeting costs are also eliminated. Sheet fed process pays an up charge ranging from 10% to 20% on sheeting/trimming loss of material and running cost.

Execution of any given job in this process would be much faster com

pared to conventional sheet fed operation, which operates in stages. This equipment fitted with infra-red and electrical heating system, would also provide facilities to print non-absorbant poly-coated and foil-laminated board. This element would further increase the scope of wide range, sophisticated product execution which presently is a bottleneck with leading converters”.

17.      Para 2.4 deals with the product and its marketability and it says :

“The plant will be producing multi-colour printed, varnished blanks and conventional packaging materials. It would enjoy a specially advantageous position as about half the capacity of the plant would be utilised for captive consumption of M/s. Godfrey Philips India Ltd. one of the principal cigarette manufacturers in India....”

18.      The aforesaid extracts from the Techno-economic Feasibility study which have not been referred to in the show cause notice clearly show that the project concept is to undertake varied multi-colour printing jobs including production of cigarette shell blanks or carton blanks. The projected investment for producing multi-colour printed, cut creased carton blanks in sheets further shows that the selection of technology and the final selection of the machine itself are both in conformity with the Project Concept projected in the Techno Feasibility Report. The selection of Web Offset multi-colour Printing machine has been based purely on a consideration of the economic considerations of production, vis-a-vis the sheet fed process. Finally considering the product concept and the marketability which are important considerations in any such study, the report recognises that half the capacity of the plant would be utilised for captive consumption of production of multi-colour printed, varnished blanks for M/s. Godfrey Phillips India Ltd. These are the important considerations and have been ignored by the Department in projecting its view on the Techno-Feasibility study in para 5 of the show cause notice. The para, on the contrary, highlights the survey of packaging units made by the promoters and the raw-material requirements at the optimum capacity of 4,500 tons per annum. These considerations are of no relevance to the show cause notice. What is of relevance is the product concept, the selection of technology, the selection of the particular type of machine and, above all, what the machine actually produces, factors which have been completely ignored in the matter of classification of functional machines.

19.      Para 2.6 of the study deals with ‘Plant & Machinery and Process’. It says -

“Having decided to go in for an in-line printing conversion equipment which its all round superiority over conventional sheet-fed equipment finally selected after scrutinising and evaluating all aspects is a CHAMBON VO 650 in-line printing and conversion machine.

The ‘CHAMBON IN-LINE’ concept is to start with a reel of board or paper at one end of the machine and to deliver in a single operation, printed, varnished, embossed, cut, creased, stripped and counted printed blanks or reels at the offer”.

(The show cause notice which gives the extract of the above para adds “cartons” after “blanks” in the last line, which is erroneous).

20.      The Techno Feasibility study on which the Department relies so much, itself shows the basic philosophy underlining the selection of the technology and the particular machine and the product that will emerge, namely, printed, varnished, embossed, cut, creased and stripped and counted printed blanks or reels.

21.      The Project Feasibility Report further projects other production possibilities in Chapter III. On the same machine printed literature, catalogues, brochures, etc. can be prepared. The CHAMBON machine is not a tailor-made as a packaging unit or a packaging machine. It is a four colour web off-set rotary printing machine which has the further facilities such as embossing, varnishing, cutting, die-cutting, grooving/creasing. These additional facilities do not make the machine anything other than a printing machine. The Explanatory Note on page 1239 states that the printing process (particularly the small or medium sized rotary presses) can be fitted with a series making-up units arranged side by side with the printing unit, so that starting from say a single reel of paper, complex products (e.g. box shapes, packagings, labels, railway tickets) can be completed in one single continuous operation. Yet even these machines with this configuration will fall under Heading 84.43 as printing machines.

20. In this context it is pertinent to note that the Hon’ble Delhi High Court in the case of M/s. Zupiter Printery and Another v. Union of India reported in  1991 (34) ECR 7 (Delhi), had occasion to consider whether outer shells of cigarette packets are boxes or containers and the Court held that the outer shells of a cigarette packet is neither a box nor a container as understood in commercial parlance. Relevant extracts from the judgment are set out below:

12. Cigarette packet, according to the petitioner, consists of two component parts, one component part is described as “outer shell”, the other a “slide” which is inserted in the shell to complete the packet. The said packet becomes complete only when slide is inserted into the “outer shell. The outer shell cannot by itself hold or contain the cigarettes. It is only slide which contains the cigarettes. When inserted in the shell, it becomes cigarette packet.

13. Mr. Ravinder Narain, Advocate appearing for the petitioner contended that outer shell by itself cannot function either as a box or a container nor fall in the definition of a container or box. Container or box must be capable of holding by itself without any accessory. The outer shell in this case by itself cannot hold the cigarettes. It is to be seen at what stage excise duty is to be levied. In the case in hand, since the petitioner manufactures only outer shell which being open on both sides is incapable of holding any cigarettes and it is at this stage when it is mere shell, without any aid, it cannot be called box. The other important component is the slide, insertion of which makes it a container or box. But in the factory of petitioner slides are not manufactured. In the absence of slides, the shell by itself at that stage cannot be called box. Therefore, the stage at which the duty is to be levied is a very relevant factor. The end-use of the article is irrelevant in the context of the entry, particularly when there is no reference to the use of the article. In order to determine what that given article is, its composition and contents are to be looked into. The fact that an article can be put to a different use is not a relevant consideration. Shell by itself has to be considered at the time of its manufacture for its natural placement.

14. We had the privilege to see this outer shell i.e., the product of the petitioner. It is open from both sides. Without the slide it cannot hold or contain cigarettes. It is only when slide is inserted that it becomes complete and can be called a box or container, but without slide it is neither. Broad description of the shell does not fit in the expression of box or container.

15. Definition of “container” came up for consideration before the Supreme Court in a recent judgment of M/s. G. Claridge & Company Ltd. v. Collector of Central Excise, Pune reported in JT 1991 (1) S.C. 394 = 1991 (33) ECR 433 S.C. It was observed by the Supreme Court that the expression “Container” is used in three different senses; in a broad sense, it means a receptacle which contains, in a narrower sense, it means a receptacle in which articles are covered or enclosed and transported; and in a more limited sense, it means enclosures used in shipping or railway for transport of goods. By applying the above principle to the facts of the present case, if used in broad sense, the outer shell is neither a receptacle nor can contain an article by itself. This outer shell can also not be a container in a narrower sense because any articles placed in outer shell are not covered or enclosed nor they can be transported as such; nor the outer shell can be called an enclosure, which can be used for transportation of the cigarettes. The word “container” is admittedly preceded by the words “boxes, cartons, bags and other packing” under sub-item (4) of Item 17 of the Tariff. Supreme Court in the above said case observed that it is a well accepted canon of statutory construction that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. It is based on the principle that words take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. Considering the expression ‘containers’ in the context in which it is used, the said expression has to be construed to mean ‘packing containers’ which are analogous to boxes and cartons, that is, an enclosed receptacle which can be used for storage and transportation of articles. The shell i.e., the product of the petitioner, is open from both the sides. In the absence of the slide this shell by itself will not be in a position to hold the cigarettes. It is only when the slide is inserted inside the shell that it can be called a “box” or “container” but without slide it is neither. Broad description of the shell does not fit in the expression of box or container.

16. Mr. Chandrasekharan stated at the Bar that the Department is treating the shell as “box” and not as container, carton or bag as the case may be. Mr. Chandrasekharan contended that the shell is described as box under the Indian Standard Guide for principle uses and styles of fibreboard containers. I.S.I., guidelines 6.4 described slide type boxes. Slide type boxes consist of several pieces of liners and sleeves sliding in different directions into each other. This group also includes outside sleeves in other cases. Referring to this ISI guidelines, Mr. Chandrasekharan contended that the outside sleeves as in the present case, the shell, will fall into the category of boxes. He drew our attention to diagrammatical representation made in this book to emphasise that shell by itself is a box. This contention has no force because ISI guide is relevant for standardization and quality control. In the case of Indian Aluminium Cables Ltd. v. Union of India and Others, 1985 (021) ELT 3 = 1985 ECR 1465 (SC), Supreme Court observed that specifications issued by the Indian Standards Institution are for ensuring control and have nothing to do with the classification the goods belong to a Tariff Schedule. In another case Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co., 1988(09)LCX0051 Eq 1988 (037) ELT 0480 (S.C.) = 1989 (20) ECR 273 (SC), Supreme Court pointed out the circumstances when ISI specifications can be relied upon. It was observed that when there is no trade evidence available then ISI specifications should be relied upon for interpreting a Tariff Entry. The trade meaning is one, which is prevalent in that particular trade where that good is known or traded. If special type of goods is subject-matter of a fiscal entry then that trade entry must be understood in the context of that particular trade, bearing in mind that particular word. It is only in the absence of the same that the specification given by the Indian Standards Institution can be relied upon. These observations of Supreme Court are of no help to the respondent, rather they help the petitioner. In the case in hand petitioner has at length relied on the fact that in his trade the outer shell inclusive of the slide is alone understood as packet or a container of the cigarettes in the absence of the slide it is merely a shell and not a box. In the cigarette trade the shell is not known as a “box” which is a relevant consideration to be taken as observed by the Supreme Court in the above-mentioned judgment. By “box” we understand an encasement which ordinarily is used for the convenient transportation of its contents. Chambers English Dictionary defines “box” as “receptacle for holding anything usually four sided”. Box is in fact more like a shelter which keeps other articles in itself. Therefore, in the Oxford English Dictionary, Vol. I “box” has been defined as “a case or receptacle usually having a lid, originally applied to a small receptacle of any material for drug, ointments or valuables”.

17. The question for consideration is, whether the “outer shell”, manufactured by the petitioner, which has no lid and is open from both sides can hold and keep cigarettes. The answer would be in the negative. This is neither an encasement nor a receptacle which can hold the thing in itself.  Even if we do not give much importance to the dictionary meaning of the word “box” still the correct guide in such a case is the context and the trade meaning. The trade meaning is one which is prevalent in that particular trade. Fiscal Entry must be understood in that context of that particular trade. In the cigarette trade, Mr. Ravinder Narain pointed out that when 20 packets of cigarettes are put in a bigger box or a container, such an outer container is known in commercial and common parlance as a carton. These cartons are then put in bigger cardboard boxes and such bigger containers are known as boxes. In commercial and in cigarette trade, the container in which cigarettes are packed is known as a packet of cigarette and not as a box or carton. Therefore, even for the sake of argument, if it is presumed that the “outer shell” is a packet, still it cannot be called a box. That packet consists of both the components, the shell and the slide. But in the absence of the slide by no stretch of imagination it can be called a box.

18. The definition of “goods” make it clear that to become “goods” an article must be something which can ordinarily come to the market to be sold and bought. But at the shell stage, it can neither be bought nor sold in the market. Box has a definite meaning as understood in the common parlance. Therefore, this mere outer shell by itself cannot be put in that category. To be called a “box” it must answer to the description of a “box”. An article cannot a “box”, it must answer to the description of a “box”. An article cannot be called a “box”, if it assumes the shape after some other things are put into it i.e. the slide in this case. The outer shell to be described as a box must have a separate and independent existence from the slide, but that is not the case.”

21. Therefore, no doubt is left in our minds that the machine falls for classification under Heading 84.43 and not under Heading 84.79.

22. We also agree with the learned Consultant that the imported goods are eligible for the benefit of Notification 114/80-Cus. dated 19-6-1980 in terms of Sl. No. 1 thereof as there is no dispute that the machine is a printing machine with output of more than 35,000 impressions per hour and falling under Chapter 84. The benefit cannot be denied due to the addition of DCP Platen Cutter/Creaser in view of several judgments of Tribunal which have taken the consistent view that the exemption to a machine based on a specific use or function is not to be denied on the ground that a machine is capable of other use or function also.

23. In the case of Andhra Patrika, Madras v. Collector of Customs reported in 1983(05)LCX0024 Eq 1983 (013) ELT 1103 (CEGAT) the Tribunal held that Notification 11/77-Cus. does not stipulate that the automatic film processor covered therein should be exclusively for film processing only and, therefore, the imported machine which is an automatic film processor and in addition to film processing the machine can also perform other function of paper processing would still be exempted under the said notification as automatic film processor.

23.1 In the case of Collector of Customs v. Blue Star Ltd. reported in 1990 (050) ELT 186 the Tribunal held that the exemption to a machine based on specific use or function is not to be denied if such machine is capable of other use or functions also. Para 8 of the order is reproduced below :

“We have heard both the sides and have gone through the facts and circumstances of the case. The facts are not disputed. The respondents had imported Brinell and Vickers Hardness Testing machine for determining the Brinell and Vickers hardness of all steels and metals under load upto 250 Kgs. We have also gone through the catalogue. We have also perused the Notification No. 49/78-Cus., dated 1-3-1978. Serial No. 7 pertains to “Vickers Hardness tester”. We have also gone through the earlier order passed by the Tribunal. In para No. 6 of the order, the Tribunal had relied on an earlier order in Appeal No. 2552/83-B2 in the case of Collector of Customs, Bombay v. Living Media India Ltd. and it was held by the Tribunal that merely because a machine can perform other functions the benefit of the exemption cannot be denied. The Collector (Appeals) in his order had observed that the machine imported by the respondents carries out a small range of Brinell test and the same cannot be considered as a standard test as the machine is not designed to cover the full range of hardness testing under the Brinell’s method which goes upto 3,000 kgs. The machine imported by the respondents is capable of testing up-to 250 Kgs. The machine is basically devised to carry out the Vickers hardness test of steels and metals. The judgments cited by the learned JDR do not help the appellant in any way. The machines imported by the respondents are in conformity with the description given at Sl. No. 7 of the Notification No. 49/78-Cus. dated 1st March, 1978.”

23.2 In the case of Escorts Ltd. v. Collector of Customs reported in 1990 (047) ELT 68 the Tribunal held that concessional rate of duty in terms of Notification 243/78 to goods specified therein falling under Chapter 90 of the CTA which are designed for testing purposes in the automotive industry cannot be denied on the ground that the equipment imported in addition to its use for testing purposes in the automotive industry is also used for general purpose. In the light of the settled law we hold that the benefit of Notification 114/80-Cus., dated 19-6-1980 is available to the machine in question.

24. In the result we set aside the impugned order and allow the appeal with consequential relief to the appellants.

25. [Contra per : S.K. Bhatnagar, Vice-President]. - With due requests to Hon’ble Judicial Member, my views and orders in the matter are as follows :

26. I observe that the appellants have declared their machine merely as ‘CHAMBON Web-fed offset rotary printing machine” having an output of 35,000 composite impressions per hour as per the documents presented at the time of importation. However, from the Project Report and the manufacturer’s catalogue read with the Customs Examination Report and the statement of their Director Technical, Shri Debasis Chaudhuri. It is apparent that what has been imported in fact is a Chambon VO 650 in-line printing and conversion machine. In other words, it is not a printing machine simpliciter as claimed but a composite machine consisting of two principal units, one capable of off-set printing and performing other functions ancillary or incidental to printing and the second, the conversion unit, capable of acting as a converter of printed matter. The pamphlet produced by the appellants themselves entitled “Chambon 720” describes that machines …….for “inline printing and converting of folding cartons” and is said to be similar to Chambon VO 650. It also refers to “the combination of off-set plus platen processes”.

27. Apart from describing the off set printing unit and ancillary equipment, it also describes the platen cutter, creaser and reception of “finished cartons”, rotary waste stripping and waste extraction. It also describes the off-set unit type VO and Web-fed platen cutter, creaser type DCP. In the latter, apart from cutting, creasing, embossing waste extraction and ‘carton transfer’, it also describes ‘carton reception’ and delivery.

28. In the project report, it is mentioned, inter alia, that the project is being set up for undertaking multi-colour printing and production of catalogues, advertising and packaging material, video-cassette covers, record sleeves, etc.

29. ”To cater to this unfulfilled area of packaging Jindals have decided to set up a modern web-fed in-lines off-set machine in India”. “Accordingly, this in-line installation for the multi-purpose printing and manufacture of cartons has been considered”. “The plant will be producing multi-coloured printed, varnished blanks and conventional packing materials”. “About half the capacity of the plant would be utilised for captive consumption of M/s. Godfrey Philips India Ltd., one of the principal cigarette manufacturers in India, the remaining capacity would be utilised for a wide range of consumer and industrial products like cosmetics, detergents, pharmaceuticals, liquor, tea, confectionery, flash-lights, incense, hosiery, garments, auto-spares and bearings, etc.”

“Plant and machinery and process :

It is a CHAMBON VO 650 in-line printing and conversion machine. The “CHAMBON IN-LINE” concept is to start with a reel of board or paper at one end of the machine and to delivery in a single operation, printed, varnished, embossed, cut, creased stripped and counted printed blanks or reels at the other. Further scope of U.V. coating on special packaging products are -

(1)   Polyester Film Laminated Packs;

(2)   Shrimp Cartons;

(3)   Playing Cards;

(4)   Export Packs.”

(5)   “DCP Platen Press : Incorporating Rotary, Stripping and Counted Stack Reception: This equipment converts the printed web into fully finished, counted stacks of cartons” and

(6)   “Carton Separation and Collection.”

30. ”Accordingly an in-line installation for the multi-colour printing and manufacture of carton has been considered.”

31. ”In this installation, in one single operation, the printing, varnishing, cutting and creasing, stripping of cartons are carried out.”

32. ”Stripped Carton Separation and Collection:

The stripped sheets of cartons are first separated, then diverged and finally deposited on the collector band in inter-leaved forms. An electronic batch counter and drop are mechanism interrupts the continuous flow of shingled cartons to produce counted stacks.”

33. In view of the above position, it is clear that what has been imported is a composite machine which was not fully or completely described in the main documents initially filed at the time of importation namely, bill of entry and invoice.

34. As regards the classification our attention has been drawn to Heading 8443 and the proviso printing presses particularly small or medium size rotary, the presses can be fitted with the series of making up units arranged side by side with the printing units so that starting from say a single reel of paper complex products (example box packaging, labels, railway tickets) can be completed in one single and continuous operation; and also to machine for uses ancillary to printing.

35. It has also been mentioned before us that in respect of multi-function machines and composite machines, Section Note 3 provides that in general multi-function machines are classified according to the principal function of the machines and in case of composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole consecutively or simultaneously performing separate functions which are generally complementary and are described in different headings of Section XVI are also classified according to the principal function of the composite machine.

36. The following are examples of such composite machines :

(1)     Printing machines with a subsidiary machine for holding paper (Heading 84.43);

(2)     A cardboard packs making machine combined with an auxillary machine for printing name or symbol design (Heading 84.41);

(3)     Cigarette making machinery combined with subsidiary packaging machinery.

37. For the purpose of the above provisions, machines of different kinds are taken to be fitted together to form a whole when incorporated one in the other or mounted one on the other or mounted on a common base or frame or in a common housing. Assemblies of machines should not be taken to be fitted together to form a whole unless the machines are designed to be permanently attached either to each or to a common base, frame housing, etc.

38. Note 3, Section XVI need not be invoked when the composite machine is covered as such by a particular heading, for example, some types of orientation machines. Insofar as the Customs Tariff is concerned, our attention has been drawn to Heading 84.43 (Printing Machinery; Machines for uses ancillary to printing). Off-set Printing Machinery: 84.43 - Reel Fed and to Chapter Note 7 says a machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose.

39. It has been argued that in the case of this machine, the principal purpose is printing and, therefore, according to the appellants it was classifiable under 84.43, whereas according to the Department both printing as well as carton making were the principal purposes and Section Note 7 also states that subject to Note 2 to this Chapter and Note 3 Section 16, a machine the principal purpose of which is not described in any Heading for which no one purpose is the principal purpose is unless the context otherwise required to be classified in Heading No. 84.79. A composite machine consisting of two or more machines fitted together to form a whole and other machines adopted for the purpose of performing two or more complimentary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

40. Accordingly it is required to be decided whether this imported machine was required to be classified in 84.43 or 84.79.

41. In this respect, I find that this composite machine is a sophisticated multi-purpose machine which is very versatile and capable of performing a series of functions including printing and its ancillary functions as well as functions leading to the manufacture of packaging material, the exact type of activity (or activities) depending upon the order. Therefore, in some cases, it may after creasing and cutting nearly prepare the blanks for cigarette packets cells, in other cases, it could be utilised for manufacture of finished cartons delivered in counted stacks.

42. The machines could also be used for other purposes as mentioned in paragraph 29 above where its utility for a wide range of consumer and industrial products has been mentioned.

43. In view of the above position, the High Court judgment in the case of M/s. Zupiter Printery  v. UOI [1991 (34) ECR 7] does not come to the rescue of the appellants.

44. In view of the above position, I consider that the imported item was a composite machine capable of two main functions (1) Printing (2) Conversion of printed matter. As such, it was classifiable under Tariff Item 84.79.

45. Further such an item was not covered by Sl. No. 1 of Notification 114/80, the benefit thereof was also not available to the appellants.

46. Again such a composite machine was not covered by O.G.L.

47. In view of the above findings I consider that the Collector was right in holding that ITC violation as well as Customs Act, violation was involved. The goods were therefore liable to confiscation and the appellants were liable to penalty. Hence I confirm the Collector’s order and reject the appeal.

DIFFERENCE OF OPINION

In view of the difference of opinion between the Hon’ble Member (Judicial) and the Vice-President, the matter is submitted to the Hon’ble President for reference to a third Member on the following points:

“(1).   Whether the appellants had described the goods correctly and completely in the bill of entry and other main documents at the time of importation or not ?

(2)     Whether the item was a printing machine simplicitor or a composite machine ?

(3)     Whether the item is correctly classifiable under Heading No. 84.43 or 84.79 ?

(4)     Whether the appellants were entitled to the benefit of Notification No. 114/80-Cus. ?

(5)     Whether the import was covered by OGL ?

(6)     Whether the goods were liable to confiscation and penalty and duty and the appeal was required to be rejected as held by the Vice-President or the impugned order was to be set aside and the appeal was required to be accepted with consequential relief as held by the Hon’ble Judicial Member ?”

48. [Order per : Harish Chander, President] - I have perused the order written by my learned brother Shri S.K. Bhatnagar, Vice-President and also the order written by learned Sister Ms. Jyoti Balasundaram, Member (Judicial). The following points of difference have been referred to me :-

(1)      Whether the appellants had described the goods correctly and completely in the bill of entry and other main documents at the time of importation or not ?

(2)      Whether the item was a printing machine simpliciter or a composite machine ?

(3)      Whether the item is correctly classifiable under Heading No. 84.43 or 84.79?

(4)      Whether the appellants were entitled to the benefit of Notification No. 114/80-Cus. ?

(5)      Whether the import was covered by OGL?

(6)      Whether the goods were liable to confiscation and penalty and duty and the appeal was required to be rejected as held by the Vice-President or the impugned order was to be set aside and the appeal was required to be accepted with consequential relief as held by the Hon’ble Judicial Member?

Learned Sister Ms. Jyoti Balasundaram has narrated the facts of the case in detail and as such, I need not reproduce the same. The appellants had imported the web-fed high speed letter and off-set rotary printing machine having output of more than 35,000 composite impressions or copies per hour manufactured by Chambon Ltd., U.K. comprising the aforesaid configuration and had filed a bill of entry rotation No. 624, dated 15th March, 1989 and line No. 177 for clearance. The appellant had claimed its classification under Heading 84.43 as a printing machine, whereas the Revenue had assessed the same under Heading 84.79. The Revenue authorities had held that the appellant had deliberately suppressed the facts that the imported complete machine was for production of cartons and intentionally misdeclared the goods as a web-fed off-set rotary printing machine having output of 35,000 composite impressions per hour in order to avail the benefit of notification No. 114/80-Cus. and had evaded duty and there was contravention of ITC regulation. The adjudicating authority had ordered confiscation but had given an option to redeem the same after the payment of redemption fine of Rs. 60 lacs and penalty of Rs. 10 lacs was imposed and the benefit of Notification No. 114/80-Cus. was also denied.

49. Being not satisfied with the order passed by the Collector, the appellant has filed an appeal before the Tribunal. Shri K. Srinivasan, the learned Consultant has appeared on behalf of the appellant. He pleaded that the appellant had imported web-fed high speed letter and off-set rotary printing machine having output of more than 35,000 composite impressions with DCP platen. Shri Srinivasan argued that there is classification dispute. The importer has claimed the assessment as a printing machine under Heading 84.43, whereas the Revenue has assessed the same under Heading 84.79. Shri Srinivasan, the learned Consultant further pleaded that there is also allegation of ITC violation. He argued that the issue involved is whether the machine is eligible to the import under OGL Appendix I Part B which covers web-fed high speed off-set rotary printing machine having output of more than 35,000 composite impressions or copies per hour of A.M. 1988-91 Policy. Shri Srinivasan further pleaded that the appellant had claimed the benefit of Notification No. 114/80-Cus., dated 19th June, 1980. He argued that the description in the notification is the same which has been given in the ITC Policy, viz. web-fed high speed off-set rotary printing machine having output of more than 30,000 composite impressions or copies per hour. He argued that the difference is only 30,000 in the notification, whereas in the OGL entry it is 35,000. Shri Srinivasan, the learned Consultant pleaded that as per finding by the Collector it is not a printing machine simpliciter, but considering its versatile functions though it is a composite machine in terms of Chapter Note 7 to Chapter 84, the machine will have to be classified under sub-heading 8479.81 as a residuary item as elsewhere specified. He referred to the catalogue of the machine imported which appears on page 245 of the paper book and the name of the machine is Chambord-720. He argued that the appellant had actually imported 650 mm, though in the catalogue it is 750 mm. He argued that except for size, all the specifications are the same which are mentioned in the catalogue. He referred to page 247 of the paper book where the detailed description of the machine has been given and Serial No. 6 is the platen-cutter-creaser which appears on page 247 of the paper book and on page 250 of the paper book the detailed description of cutter and creasing has been given as “A mobile lower base block with minimal travel guarantees vibration free high speed operation Eccentics, mounted on roller bearings, ensure a free and silent motion of the base block. A quick release locking and extraction system holds the cutting forme, to the fixed upper bolster. Platen pressure can be adjusted accurately whilst in operation and a digital display read out gives a continuous reading of the cutting pressure. The platen can be driven independently from the press enabling forme preparation and adjustment whilst the printing press is being made ready. He pleaded that the machine cuts and creases blanks. Cigarette shell gumming is done by another machine outside and there is no arrangement of gumming or folding in the machine. He referred to page 1239 of HSN which appears on page 203 of the paper book. He has referred to the bill of entry which appears on pages 76 to 98. He made special reference to page 96 where the appellant had duly mentioned DCP platen. He argued that DCP platen is the name of cutter crescent. He referred to the description given in the Tariff. He referred to the Heading 84.43 which pertains to printing machine, machines for uses ancillary to printing. Heading 84.41 relates to other machine for making up paper pulp, paper or paperboard, including cutting machines of all kinds and on page 491 of the paper book appears Heading 84.79 and the description is machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter. Shri Srinivasan argued that the appellant had placed 3 orders and in all the 3 orders there was a mention that the machine imported by the appellant is composite machine. He referred to the order-in-original. Shri Srinivasan referred to the observations made by the Member Judicial in her order and also argued that he relies on the findings given by the Member Judicial. Shri Srinivasan, the learned Consultant argued that it is a composite machine and referred to Section Note 3 of Section XVI of the Customs Tariff and Section Note 3 provides that unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted to the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. Shri Srinivasan, the learned Consultant argued that since the principal function is of printing and as such, the correct classification would be under Heading 84.43 as a printing machine. He referred to the ITC Policy which appears on page 495 of the paper book and the description in Appendix I Part B page 103 of the Policy book 1 web-fed high speed letter press rotary and off-set rotary printing machines, having output of more than 35,000 composite impressions or copies per hour. Thereafter, he referred to Notification No. 114/80-Cus. which appears on pages 493 to 494 of the paper book which gives exemption to specified machines for printing industry and in terms of that notification it extends the benefit of notification at lower rate of duty at 35% and refers to the goods specified in the table falling within Chapter 84 or Chapter 90 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and at Serial No. 1 in the table the description has been given as web-fed high speed letter press rotary and web-fed offset rotary printing machines having output of 30,000 or more copies per hour. He again referred to HSN page 1132 (VI) - Multi-function Machines and Composite Machines. It has been mentioned (Section Note 3) that “In general, multi-function machines are classified according to the principal function of the machine. He further argued that Chapter Note 7 of Chapter 84 is subject to Section Note 3 of Section XVI, and 84.79 is a residuary heading. He again referred to HSN Note page 1314. Shri Srinivasan argued that principal function of the machine is printing and the cutting machine falls under Heading 8441.11. He further argued that the adjudicating authority viz. Collector and Vice-President rule out the same. He further argued that in terms of Rule 3C of the Rules of Interpretation last heading which is relevant is 8443.11. He argued that the appellant is a printer and principal function of the machine is printing and even value-wise 15% of the value is for the printing machine. Cutting machine is part of the printing machine. In support of his argument, he cited a decision of the Tribunal in the case of Associated Millers Pvt. Ltd. v. C.C., Madras reported in 1990(07)LCX0089 Eq 1990 (050) ELT 0633 (T) = 1991 (32) ECR 461 (CEGAT SB-B2). He further argued that the appellant had supplied the catalogue voluntarily. He again referred to the Notification No. 114/80-Cus. which appears on page 493 of the paper book. He argued that it is a composite machine and not a multi-function machine. He pleaded that the order passed by the Member Judicial is correct and pleaded that the same should be accepted.

50. Shri S.K. Sharma, the learned Junior Departmental Representative has appeared on behalf of the respondent. He has referred to the bill of entry and argued that there is misdeclaration of the goods. He has also referred to bill of entry page 98 of the paper book wherein description has been given as Chambon web off-set, Rotary Printing Machine having output of more than 35,000 composite impressions per hour and also the invoices which appears on pages 100 to 102 of the paper book. He also argued that the invoice on pages 100 to 102 of the paper book is attached with the bill of entry and the packing list is from pages 104 to 112 of the paper book. He has referred to the order-in-original page 2 bottom where the Collector has mentioned that the importers had declared the description of the imported machinery in the bill of entry as one Chambon Web-fed offset rotary printing machine having output of 35,000 composite impressions per hour. He argued that the invoice was submitted with the bill of entry and in the bill of entry main heading of the machine was given. Shri Sharma argued that there was investigation and there was seizure and in seizure certain telexes were seized. A reference appears on page 4 of the order-in-original bottom para 1 :“Please take note that according to the Indian Import Trade Control Current Policy, web-fed high speed off-set rotary printing machines having output of more than 35,000 composite impressions or copies per hour” are permitted to be imported in India freely under OGL (Open General Licence). But during your February visit here, you had indicated the Chambon speed to be 180 strokes per minute i.e. 10,800 impression per hour. So, this may not be permitted under OGL. We would have to apply for an import licence. Please clarify and give your views.” Shri Sharma, the learned JDR argued that invoices etc. were manipulated in accordance with ITC Policy. On internal page 8 of the order-in-original, there is a reference to the project report. He argued that the main purpose of the machine is making of flattened cartons. Shri Sharma further argued that Shri Srinivasan in his arguments has also accepted that it is a composite machine and cutter and creaser have to be used in the printing machine. Shri Sharma relied on the order passed by the Collector as well as the order passed by Shri S.K. Bhatnagar, Vice-President. He referred to Note 7 of Chapter 84 and again referred to the principal purpose and the principal purpose is manufacture of flattened cartons and the purpose is not defined anywhere. He further argued that the benefit of Notification No. 114/80-Cus. is not available and referred to Serial No. 1 of the notification. During his arguments he cited a decision of the Tribunal in the case of Collector of Customs v. O.E.N. India Ltd. reported in 1987(10)LCX0061 Eq 1989 (042) ELT 0235 (Tribunal). He argued that benefit of Notification No. 114/80-Cus. is not available to the appellants as it is a multi-function machine. He pleaded that the normal rate of duty is 85% and whereas after extending the benefit of the notification it is 35% and this benefit is not extendable to the appellant and the import is not covered under OGL. He pleaded for agreeing with the order passed by the Vice-President.

51. Shri K. Srinivasan, the learned Consultant pleaded for agreeing with the views expressed by the Member Judicial.

52. I have heard both the sides and have gone through the facts and circumstances of the case. I have duly considered their oral submissions as well as written arguments. In the matter before me the dispute is Chambon off-set rotary printing machine having output of 35,000 composite impressions per hour falls under OGL entry 2(22) of 1988-91 Policy and also whether the benefit of Notification No. 114/80-Cus. is available to the appellant. For the proper appreciation the description as given in the Appendix Part 1B on page 495 of the paper book is as under :-

“web-fed high speed letter press rotary and off-set rotary printing machine having output of more than 35,000 composite impressions or copies per hour.”

Notification No. 114/80-Cus., dated 19th June, 1980 as amended from time to time which appears on pages 493 and 494 of the paper book is reproduced below :-

“Exemption to specified machines for printing industry. — In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the Table below and falling within Chapter 84 or Chapter 90 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and are designed for use in the printing industry, when imported into India, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of 35 per cent ad valorem and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act.

(Notification No. 114-Cus., dated 19-6-1980 as amended by Notifications No. 236-Cus., dated 29-11-1980, No. 38-Cus., dated 28-2-1982, No. 176/86-Cus., dated 1-3-1986, No. 134/90-Cus., dated 20-3-1990 and No. 218/90-Cus., dated 26-7-1990.)”

A perusal of the ITC Policy as well as the notification shows that the description in the notification as well as in the ITC Policy is the same. There is also dispute as to classification. The appellant has claimed classification under Heading 84.43. Headings 84.43 and 84.79 are also reproduced below :-

The description given in the bill of entry on page 98 of the paper book is as under :-

“Chambon web offset, Rotary Printing machine having output of more than 35,000 composite impressions per hour.”

It is an admitted position that with the bill of entry the appellant had attached the invoice which contains the full details of the item imported and a perusal of the invoice on page 100 of the paper book (r) shows that there is mention of “DCP Platen cutter/creaser with inbuilt electronic insetting register control, receptacle and waste removal conveyor.” The main argument of the adjudicating authority is that it is a multi-function machine and if a machine performs multi­function then there is a violation of ITC regulations as well as benefit of Notification No. 114/80-Cus. is not extendable to the appellants. Shri Srinivasan, the learned Consultant had cited a decision of the Tribunal in the case of Associated Millers Pvt. Ltd. v. Collector of Customs, Madras reported in [1990(07)LCX0089 Eq 1990 (050) ELT 0633 (T) = 1991 (32) ECR 461].

Paras No. 8, 9 and 10 from the said judgment are reproduced below :-

8. The submissions made are considered. The machine as per the invoice imported is one complete ‘Writegen Remixer Machine’ with Cat water cooled diesel engine with other devices like; Vibratory and Tamping Screed, bitumen spraying device and with Pugmill mixing. The Remixer Design is a self-propelled mobile unit which carries out the thermal and all the mechanical stages of the process except for the final compaction, which is done by a conventional roller. The asphalt surface course is heated and then completely plasticised by the Remixer’s infrared heaters which are an integral part of the machine. The temperature is controlled by raising and lowering the heater banks and by varying the pressure across the heater banks. The surface is loosened down to the required depth by means of scarifying tynes which have automatic depth control. The material is then planed off by a levelling blade and fed to the middle of the machine by an auger. This results in the formation of a level base.

8A. The material mass is then fed into a compulsory pugmill mixer where it is thoroughly mixed with the addmix fod in from the top and if necessary with a bitumen recycling agent.

8B. The resulting new asphalt mix is forced from the pugmill in a window and spread over the heated level base by means of an auger. The Remixer’s combined tamping and vibrating screed then ensures that a level surface with a high degree of compaction is achieved. The screed has slope and grade control.

8C. After final rolling the resurfacing process is complete having achieved the desired asphalt mix characteristics and surface texture.

8D. This is a multi-purpose machine. As per Section Note 3 of Section XVI BTN and the Customs Tariff Act of India which is reproduced below :-

“Unless the Headings otherwise require, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function”.

Similarly, in respect of multi-purpose machines and combination of machines, the Chapter notes under Chapter 84 specifies as follows :-

“In general, multipurpose machines are classified according to the main purpose and main function of the machine.

Composite machine consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions which are generally complementary are classified according to the main purpose of main function of composite machine e.g. printing machines with a subsidiary machine for folding the paper (Heading 84.35).”

8E. Therefore, the parameters set forth for classification are that the machine which performs the principal function or the main purpose in a composite machine will decide the heading under which the principal function or main purpose has been mentioned. The machine imported is a Remixer. The material excavated by the Scarifier is heated and mixed in pugmill along with a new material bitumen and the resulting asphalt mix is spread. The tamping and vibrating device ensures level surface. The Assistant Collector in his order has observed: “The machine in question is a ‘Remixer’ by the nomenclature itself. This machine in addition to its functions of pre-heating, excavating, levelling and tamping also performs the function of mixing of old material with bitumen. After remixing the material is spread on the road before the process of tamping is completed”.

8F. The purpose of the machine in the main is that it is a mixer, the Heading 84.56 refers to mixing. The extract of the Heading is as under :-

“Machinery for sorting, screening, separating, washing, crushing, grinding or mixing earth, stones, ores or other mineral substances, in solid (including powder and paste) form; machinery for agglomerating, moulding or shaping solid mineral fuels; ceramic paste, unhardened cements plastering materials or other mineral products in powder and paste form; machines for forming foundry moulds of sand”.

The heading as per BTN Explanatory Notes, page 1353 covers machinery of a kind used, mainly in the extractive industries and also covers machinery for mixing mineral substances, Sl. No. 6 page 1356 which is reproduced below :-

“Machines for mixing mineral substances (crushed or broken stone, gravel, limestone, etc.) with bitumen, for preparation of bituminous road-surfacing materials”.

Mixing with bitumen for preparation of bituminous road surfacing materials would get covered by this heading. It can, therefore, be held that the main purpose or function of the machine being mixing, the other functions are complementary and the machine would correctly fall under Heading 84.56. The Tribunal has already laid the principle that classification being a question of law can be raised at any stage of proceeding - 1984(01)LCX0034 Eq 1984 (017) ELT 0368 (Tribunal) = 1984 E.C.R. 1895, Collector of Central Excise v. M/s. West Glass Works, Firozabad.

9. Since the Heading 84.56 is found to be more appropriate, the classification under Heading 84.23 is not preferred, moreover the type of functions mentioned in that Heading are not the main functions. The lower authorities have held the Heading 84.59(1) as the more appropriate classification in view of the CCCN Explanatory Notes under 84.59 (page 1367) which is for “Machines whether or not self propelled for spraying gravel on roads or similar surfaces and self propelled machines for spraying and tamping bituminous road surfacing’materials”. While 11(F)(2) and (3) under the Explanatory Notes of BTN page-1367 are for road making machines, it is seen that the machine “The Remixer” has provision for mixing in a pugmill and with addition of new material the same is spread on the surface. It is a combination with a device to prepare the material and then get it spread by the Remixer’s combined tamping and vibrating, it is not doing the solo individual function of road surfacing. Therefore, its classification under 84.59(1) gets excluded.

10. Consequently the classification under Heading 84.56 being more appropriate, the residuary Heading under 84.59(1) which has been upheld by the respondent, is set aside. The appeal is, therefore, allowed with consequential benefit to the appellants.

The Tribunal in the case of Consolidated Petrotech Industries Ltd. v. Collector of Customs reported in 1991(05)LCX0011 Eq 1992 (057) ELT 0081 (Tribunal) in paras 6, 7 and 9 had held as under :-

6. We have heard both the sides and have gone through the facts and circumstances of the case and the judgments cited by both the sides. For the proper appreciation of the correct interpretation of the Notification No. 125/86-Cus., dated 17th February, 1986 which appears on page 47 of paper book relevant extracts from the said notification are reproduced below :-

“Chapter 84 — Machinery and mechanical appliances and parts thereof

Effective rates of duty for specified food processing packing machines. - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (2) of the Table hereto annexed and falling under Chapter 84 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from -

(a)      so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of the amount calculated at the rate of 10% ad valorem; and

(b)      the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act.

Relevant extract of Notification No. 65/89-Customs, dated 1st March, 1989 is reproduced below :-

    GSR(E) In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby directs that each of the notifications of the Government of India in the Ministry of Finance (Department of Revenue), specified in column (2) of the Table hereto annexed, shall be further amended in the manner specified in the corresponding entry in column (3) of the said Table.

TABLE

A simple perusal of the Notification No. 125/86-Cus., dated 17th February, 1986 Serial No. 17 shows that the benefit is available to a machine FFS with vacuumising and inert gas flushing. We have perused the commercial invoice which appears on page 44 of the paper book. The description in the invoice has been given as under :-

“Food packing machinery Covering

2 Nos. automatic form fill and seal packaging machine for flexible packaging material with gas flushing/vacuumising your Model No. DP 7L(714) complete with spare parts kit and 2 extra assemblies heads per machine.”

Similarly description has been given in the bill of entry which appears on page 41 of the paper book. It is an admitted fact by both the sides that the machine imported was supplied with the gas flushing system but had no vacuumising facility and the adjudicating authority had accepted the appellants’ claim for the availing of the imported product under OGL of AM 1985-88 Policy. It appears that the description in the invoice as well as bill of entry was given in conformity with the AM 1985-88 Policy. However, the only issue before us is whether the appellants are entitled to the benefit of Notification No. 125/86-Cus., dated 17th February, 1986 and whether the goods fall at Serial No. 17 or 18 or 19 of the said notification. A simple perusal of Serial No. 17 shows that the description has been given as “FFS with vacuumising and inert gas flushing.” Shri G. Ramaswami, the learned Senior Advocate’s main contention is that the word “and” should be interpreted as “or”, otherwise the very intention of the Government as to the extension of benefit of Notification No. 125/86-Cus., dated 17th February, 1986 will be defeated. The meaning of the word “and” in Black’s Law Dictionary 5th edition of St. Paul Minn West Publishing Co. 1979 at page 79 has been given as under :-

“AND. A conjunction connecting words or phrases expressing the idea that the latter is to be added to or taken along with the first. Added to; together with; joined with; as well as; including. Sometimes construed as “or”. Land and Lake Ass’n v. Conklin, 182 A.D. 546, 170 N.Y.S. 427, 428.

It expresses a general relation or connection, a participation or accompaniment in sequence, having no inherent meaning standing alone but deriving force from what comes before and after. In its conjunctive sense the word is used to conjoin words, clauses, or sentences, expressing the relation of addition or connection, and signifying that something is to follow in addition to that which proceeds and its use implies that the connected elements must be grammatically co-ordinate, as where the elements preceding and succeeding the use of the words refer to the same subject-matter. While it is said that there is no exact synonym of the word in English, it has been defined to mean “along with”, “also”, “and also”, “as well as”, “besides”, “together with”. Oliver v. Oliver, 286 Ky. 6,149 S.W. 2d 540, 542.

When expression “and/or” is used, that word may be taken as will best effect the purpose of the parties as gathered from the contract taken as a whole, or, in other words, as will best accord with the equity of the situation. Bobrow v. U.S. Casualty Co., 231 A.D. 91, 246 N.Y.S. 363, 367.”

Maxwell on the Interpretation of Statutes, 12th edition by P. St. J. Langan published by N.M. Tripathi Pvt. Ltd. at pages 232 to 233 has held as under :-

“ “And” and “or”

In ordinary usage, “and” is conjunctive [(1967) 1 A.C. 192] and “or” disjunctive. (J. W. Dwyer Ltd. v. Met. Pol. Receiver - (1967) 2 Q.B. 970. But to carry out the intention of the Legislature (Uddin v. Associated Portland Cement Manufacturers Ltd. - (1965) 2 Q.B. 582; R.V. Surrey Quarter Sessions, ex-P. Commissioner of Metropolitan Police (1963) 1 Q.B. 990 it may be necessary to read “and” in place of the conjunction “or”, and vice versa.

The Disabled Soldiers Act, 1601, for example, in speaking of property to be employed for the maintenance of “sick and maimed soldiers”, referred to soldiers who were either sick or maimed, and not only to those who were both. (Duke, Charitable Uses, p. 127).

The expression “local and public authorities”, in Section 4(2) of the Prevention of Corruption Act, 1916 has been held by Vinn. J. not authorities which are either local or public.” [R.V. Newbould (1962) 2 Q.B. 102].

By Section 48(1) of the Mines and Quarries Act, 1954; “It shall be the duty of the manager of every mine to take, with respect to every road and working place in the mine, such steps by way of controlling movement of the strata in the mine and supporting the roof and sides of the road or working place secure. “Lord Reid said that he could not “suppose that it was intended that in every case the manager must both attempt to control movement of the strata and provide support.

......The natural meaning of the words of the section is that one or other of the prescribed methods must be adopted in every case”.

[John G. Stein & Co. Ltd. v. O. Hanlon (1965) A.C. 890, at p. 904.

Conversely, the Court may substitute “and” for “or”. An example is provided by the Bankrupts Act, 1603, which made it an act of bankruptcy for a trader to leave his welling house “to the intent, or whereby his ..... creditors ..... shall or may be defeated or delayed.” If construed literally, this would have exposed to bankruptcy every trader who left his home, even for an hour, if a creditor called during his absence for payment. This absurd consequence was avoided by reading “or” as “and” so that an absence from home was an act of bankruptcy only when coupled with the design of delaying or defeating creditors. “[Fowler v. Padget - (1978) 7 T.R. 509. cf. R. v. Mortlake (1805 6 East 397.]

In his book Principles of Statutory Interpretation, 4th edition 1988 Justice G.P. Singh at pages 250, 251 and 252 has written as under :-

“7. Conjunctive and Disjunctive Words ‘OR and ‘AND’.

The word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive but at times they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. [Ishwar Singh Bindra v. State of U.P. - AIR 1968 SC 360, p. 363 = (1980) 1 SCC 158; R.S. Nayak v. A.R. Antulay - (1984 2 SCC 183, pp. 224, 225 = AIR 1984 SC 684; M. Satyanarayana v. State of Karnataka - (1986) 2 SCC 512, 515 = AIR 1986 SC 1162]. As stated by SCRUTTON. L.J.: “You do sometimes read ‘or’ as ‘and’ in a statute. But you do not do it unless you are obliged because ‘or’ does not generally mean ‘and’ and ‘and’ does not generally mean ‘or’ (Green v. Premier Glynrhonwy Slate Co. (1928) 1 KB 561, p. 568; Nasiruddin v. State Transport Appellate Tribunal - AIR 1976 SC 331, p. 338 - (1975) 2 SCC 671; Municipal Corporation of Delhi v. Tek Chand Bhatia, supra; State (Delhi Administration) v. Puran Mal - (1985) 2 SCC 589 = AIR 1985 SC 741.

And as pointed out by LORD HALSBURY the reading of ‘or’ as ‘and’ is not to be resorted to, “unless some other part of the same statute or the clear intention of it requires that to be done. “[Mersey Docks and Harbour Board v. Henderson Bros. - (1888) 13 AC 595 (HL), p. 603. See further Puran Singh v. State of M.P. - AIR 1965 SC 1583 p. 1584, (para 5); Municipal Corporation of Delhi v. Tek Chand Bhatia, supra.

But if the literal reading of the words is less favourable to the subject provided that the intention of the Legislature is otherwise quite clear.

[A.G. v. Beauchamp (1920) 1 KB 650; R. v. Oakes - (1959) 2 All ER 92.]

In Section 2(1)(d)(i) of the Bombay Lotteries and Prize Competition Control and Tax Act, 1948 (as amended by Act 30 of 1952), the Supreme Court read ‘or’ as ‘and’ to give effect to “the clear intention of the Legislature as expressed in the Act read as a whole.”

(State of Bombay v. RMD Chamarbaugwala - AIR 1957 SC 699, p. 709)

The words ‘owner or master’ as they occur in Section 1(2) of the Oil in Navigable Waters Act, 1955 were construed by the House of Lords to mean ‘owner and master’ making both of them guilty of the offence under that section as reading of ‘or’ as ‘or’ would have produced an absurd result of leaving it to the Executive to select either the owner or master for being prosecuted without the Act giving any guidance for the selection. Such a result would have also been against the constitutional practice. [Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry - (1974) 2 All ER 97 (HL)]. Similarly in Section 42(2) of the Income Tax Act, 1922 the result produced by reading ‘or’ as ‘or’ could not have been intended” and the word ‘or’ was read in the context as meaning ‘and’. [Mazagaon Dock Ltd. v. CIT & EPT - AIR 1958 SC 861]. In Section 11 of the Suits Valuation Act, 1887, Clauses (a) and (b) of sub-section (1) although separately by the word ‘or’ have been read conjunctively as that is the obvious intention disclosed by sub-section (2). [Kiran Singh v. Chaman Paswan - AIR 1954 SC 340, p. 345] See further, Tilkayat Shri Govindlalji v. State of Rajasthan - AIR 1963 SC 1638, p. 1652 (para 39).

Speaking generally, a distinction may be made between positive and negative conditions prescribed by a statute for acquiring a right or benefit. Positive conditions separated by ‘or’ are read in the alternative but negative conditions connected by ‘or’ are construed as cumulative and ‘or’ is read as ‘nor’ or ‘and’.”

In the case of R. v. Oakes reported in (1959) 2 All ER 92 it was held as under :

“In Section 7 of the Official Secrets Act, 1920, which reads : ‘Any person who attempts to commit any offence under the principal Act or this Act, or solicits or incites or endeavours to persuade another person to commit an offence, or aids or abets and does any act preparatory to the commission of an offence’, the word ‘and’ printed in Italics was read as ‘or’ for by reading ‘and’ as ‘and’ the result produced was unintelligible and absurd and against the clear intention of the Legislature.”

(Extract taken from Principles of Statutory Interpretation by Justice G.P. Singh page 252). Hon’ble Supreme Court in the case of Ishwar Singh Bindra and Others v. State of U.P. reported in AIR 1968 SC 1450 at page 1454 in para 11 had held as under :-

“Now if the expression “substances” is to be taken to mean something other than “medicine” as has been held in our previous decision it becomes difficult to understand how the word “and” as used in the definition of “drug” in S. 3(b)(i) between “medicines” and “substances” could have been intended to have been used conjunctively. It would be much more appropriate in the context to read it disconjunctively. In Stroud’s Judicial Dictionary, 3rd Ed. it is stated at page 135 that “and” has generally a cumulative sense, requiring the fulfilment of all the conditions that it joins together, and herein it is the antithesis of or. Sometimes, however, even in such a connection, it is, by force of a context, read as “or”. Similarly in Maxwell on Interpretation of Statutes, 11th Ed., it has been accepted that “to carry out the intention of the legislature it is occasionally found necessary to read the conjunctions “or” and “and” one for the other.”

Hon’ble Supreme Court in the case of M. Satyanarayana v. The State of Karnataka and Another reported in AIR 1986 SC 1162 had held that the statute cannot be construed merely with reference to grammar. Para No. 5 from the said judgment is reproduced below :-

“5. If the expression ‘and’ in clause (a) is read independently then there was no need for him to suffer at all and mere participation would be enough to make him a political sufferer. That would defeat the rationale behind the rule. It would therefore, frustrate the intention and purpose of the Legislature. The expression ‘and’ in these circumstances cannot be read disjunctively. It is not possible to hold that sub-clause (a) should be read independently of sub-clause (b). A statute cannot be construed merely with reference to grammar. Statute whenever the language permits must be construed reasonably and rationally to give effect to the intention and purpose of the Legislature. The expression ‘and’ has generally a cumulative effect, requiring the fulfilment of all the conditions that it joins together and it is antithesis of ‘or’. In this connection reference may be made to A.K. Gopalan v. State of Madras - 1950 SCR 88 at p. 126 (AIR 1950 SC 27). See also the observations of this Court in Ishwar Singh Bindra v. State of U.P. - (1969) 1 SCR 219.”

Shri G. Ramaswami, the learned Senior Advocate, has also relied on the following judgments where the word “and” has to be substituted by “or”:

(1)      The Food Inspector, Trichur Municipality, Trichur v. O.D. Paul and Another - AIR 1965 Kerala 96

(2)      Municipal Council, Raipur v. Bishandas Nathumal - AIR 1969 M.P. 147

(3)      In re : Salem Govindappa Chetty - AlR 1970 Andhra Pradesh 293

(4)      Dinesh Chandra Srivastava and Others v. The State of U.P. - AIR 1977 Allahabad 310.

This Tribunal had an occasion to deal with the interpretation of exemption notification in the case of Collector of Customs v. Delhi Tubes Pvt. Ltd. reported in 1990(02)LCX0043 Eq 1990 (049) ELT 0243 (Tribunal). Para Nos. 15 and 25 from the said judgment are reproduced below :-

“15. Hon’ble Calcutta High Court in the case of the Bengal National Textile Ltd. v. C.T.A., Pillai, Jt. Secretary and Others reported in 1979 (4) ELT J 664 had held that “it is well settled that the provisions of a statute or legislation should be construed in the context and the interpretation should not be confined only to its grammatical meaning. If there is any ambiguity in the expression used in the statute, it should be resolved in favour of the assessee or the tax-payer. It is not the technical meaning that should be adhered to in interpreting the expression in a statute but preference should be given to the expression as understood in the world of commerce.’ It was further held by the Hon’ble High Court as under :-

In this connection reference was made to the significantly different languages used in the earlier notification, dated 24th March, 1972 and 24th July, 1972 referred to hereinbefore, and also to the subsequent notification dated the 16th March, 1976 which according to Counsel for the petitioners was redundant if the non-cellulosic fibre content was included in the acrylic fibre. Counsel naturally stressed that in constructing a provision of this nature the expression used in the context or the statute must be looked into and mere grammatical meaning or dictionary meaning of one particular expression divorced from the context or the scope of the notification or the statute should not be adhered to and in this context the context and the purpose and the entire scheme was much more important than grammar as, he stressed, was emphasised by Sur Thomas Moore as indicated in Craics Law, on Statute 7th Edition, pages 159 and 160. There is, however, in my opinion, no dispute on this proposition and now it is well-settled that an expression of this nature in a particular fiscal or in any other legislation must be construed in the context and the meaning should not be confined only to its grammatical meaning. There is also no dispute on the proposition that an ambiguity, if there be any, in the expression used should be resolved in favour of the assessee or tax-payer. Counsel also drew my attention to three affidavits of Bhupendra Singh Boid, Mangal Singh and S.K. Guin filed in support of this rule claiming to be the dealers in these types of goods and who have alleged that acrylic fibre is not known in the trade as non-cellulosic fibre. In this connection, reliance was placed on the decision in the case of Union of India v. Delhi Cloth & General Mills, AIR 1963 SC 791, where the Supreme Court has reiterated that in constructing expressions of this nature, it is not the technical meaning that should be adhered to but rather preference should be given to the expression as understood in the world of commerce.”

Hon’ble A.P. High Court in the case of Andhra Pradesh Paper Mills Ltd. v. Assistant Collector of C.E. reported in 1980 (8) ELT 210 had held that the “object of the exemption notification is to confer a certain benefit upon the manufacturer or the buyer/consumer as the case may be, as an incentive, with a view to encourage production or consumption. But, it cannot be said that this would virtually amount to adding a part of the excise duty to the manufacturing cost and profits while arriving at the assessable value under Section 4 of the Central Excise Act.”

“25. It is also a well-settled proposition that where a term is not defined in a statute, the meaning given to that term by the people generally dealing with such a statute should be applied. The Department has not adduced any evidence as to what is meant by the expression ‘semi-finished’ in relation to a ‘flat-rolled product, hot-rolled’ in coil form. The respondent, on the other hand, relies on a certificate of well-known firm of Consulting Engineers M.N. Dastur & Co. Credibility of this certificate is sought to be struck at by the Department on that no sample was sent to M.N. Dastur & Co. This, in our view, is not a good ground when the description of the product, namely, ‘unpickled, with mill edges, fish tail and unskin-passed’ is not challenged and it is on the basis of that description that a certificate has been given to the effect that the product is semi-finished.”

The order of the Tribunal in the case of Collector of Customs, Madras v. Delhi Tubes Pvt. Ltd. reported in 1990 (049) ELT 243 was affirmed by the Hon’ble Supreme Court in Civil Appeal No. 4887/90, Collector of Customs v. Delhi Tubes Pvt. Ltd. and the appeal filed by the Department was dismissed by the Hon’ble Supreme Court. The order of the Supreme Court in Civil Appeal No. 4887/90, Collector of Customs, Madras v. Delhi Tubes is reproduced below :-

“The Civil Appeal is dismissed.”

Hon’ble Supreme Court in the case of Tilkayat Shri Govindlalji Maharaj v. State of Rajasthan and Others reported in AIR 1963 SC 1638 had held that where two constructions possible - the Court should adopt that construction which upholds validity. Para No. 40 from the said judgment is reproduced below :-

“40. Later, we will have occasion to deal with the specific sections which have been challenged before us, but at this stage, it is necessary to consider the broad scheme of the Act in order to be able to appreciate the points raised by the Tilkayat and the denomination in challenging its validity. For the purpose of ascertaining the true scope and effect of the scheme envisaged by the Act it is necessary to concentrate on Sections 3, 4, 16, 22 and 34. The scheme of the Act, as its preamble indicates, is to provide for the better administration and governance of the temple of Shri Shrinathji at Nathdwara. It proceeds on the basis that the temple of Shrinathji is a public temple and having regard to the background of the administration of its affairs in the past, the Legislature thought it was necessary to make a more satisfactory provision which will lead to its better administration and governance. In doing so the Legislature has taken precaution to safeguard the performance of religious rites and the observance of religious practices in accordance with traditional usage and custom. When the validity of any legislative enactment is impugned on the ground that its material provisions contravene one or the other of the fundamental rights guaranteed by the Constitution, it is necessary to bear in mind the primary rule of construction. If the impugned provisions of the statute are reasonably capable of a construction which does not involve the infringement of any fundamental rights, that construction must be preferred though it may reasonably be possible to adopt another construction which leads to the infringement of the said fundamental rights. If the impugned provisions are reasonably not capable of the construction which would save its validity, that of course is another matter; but if two constructions are reasonably possible, then it is necessary that the Courts should adopt that construction which upholds the validity of the Act rather than the one which affects its validity. Bearing this rule of construction in mind, we must examine the five sections to which we have just referred. Section 3 no doubt provides for the vesting of the temple property and all its endowments including offerings in the deity of Shrinathji, and that clearly is unexceptionable. If the temple is a public temple, under Hindu Law the idol of Shrinathji is a judicial person and so, the ownership of the temple and all its endowments including offerings made before the idol constitute the property of the idol. Having thus stated what is the true legal position about the ownership of the temple and the endowments, Section 3 proceeds to add that the Board constituted under this Act shall be entitled to the possession of the said property. If the Legislature intended to provide for the better administration of the temple properties, it was absolutely essential to constitute a proper Board to look after the said administration, and so, all that Section 3 does is to enable the Board to take care of the temple properties and in that sense, it provides that the Board shall be entitled to claim possession of the said properties. In the context, this provision does not mean that the Board would be entitled to dispossess persons who are in possession of the said properties: it only means that the Board will be entitled to protect its possession by taking such steps as in law may be open to it and necessary in that behalf. Section 4 is a mere corrollary to Section 3 because it provides that the administration of the temple and all its endowments shall vest in the Board. Thus, the result of reading Sections 3 and 4 is that the statute declares of the temple vest in the deity of Shrinathji and provides for the administration of the said properties by appointing a Board and entrusting to the Board the said administration.”

Hon’ble Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P) Ltd. reported in AIR 1970 SC 1734 had held that where two interpretations are possible, the interpretation which is in favour of the assessee should be adopted. Para No. 20 from the said judgment is reproduced below :-

“20. On behalf of the Revenue it is pointed out that a great deal of inconvenience will result if a voluntary return can be entertained at any time in accordance with Section 22(3) when loss is involved and in order to give the assessee the benefit of the carry-forward of the loss, a number of assessments would have to be reopened. It is difficult to accede to such an argument merely on the ground of inconvenience. Moreover, it is common ground that a voluntary return cannot be filed beyond the period specified in Section 34(3) of the Act. It cannot be overlooked that even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute.”

Hon’ble Supreme Court in the following cases has also observed that where two reasonable constructions are possible - that in favour of the assessee should be accepted :-

(1)      Commissioner of Income-tax, West Bengal v. Vegetable Products Ltd. - (1973) 88 ITR 192

(2)      Commissioner of Income-tax, West Bengal v. Naga Hills Tea Co. Ltd. - (1973) 89 ITR 236.

(3)      Controller of Estate Duty v. R. Kanakasabai and Others - (1973) 89 ITR 251.

In the following decisions the various courts had held that where a literal construction would defeat the obvious intention of the legislation and produce a wholly unreasonable result, the courts must “do some violence to the words” and so achieve that obvious intention and produce a rational construction.

(1)      Commissioner of Income-tax, Central Calcutta v. National Taj Traders -(1980) 121 ITR 535

(2)      K.P. Varghese v. ITO, Eranakulam and Another - (1981) 131 ITR 597.

(3)      Commissioner of Income-tax, Bangalore v. J.H. Golta. - (1985) 156 ITR 323 at page 339.

in which it was held as under :-

“Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect instrument for the expression of human intention. It is well to remember the warning administered by Judge learned Hand that one should not make a fortress out of the dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meaning.”

In the matter before us, the Government amended the notification vide Notification No. 65/89-Customs and Serial No. 17 of Notification No. 125/86-Customs, dated 17th February, 1986 has been amended as under :-

   17. “Form, Fill and Seal machine for flexible packaging materials with either vaccumising or inert gas flushing or both.”

7. In view of the above discussion, we are of the view that the word “and” should be interpretated as “or” in a disconjunctive manner. Accordingly, we set aside the impugned order and order that the appellants are entitled to the benefit of Notification No. 125/86-Cus., dated 17th February, 1986 and the appeal is allowed.

9. The appellants have urged that the word ‘and’ occurring in the expression ‘FFS with vacuumising and inert gas flushing’ should be read as ‘or’. In other words, it is urged that the benefit of concessional rate of duty would be available either to FFS with vacuumising or FFS with inert gas flushing. If the word ‘and’ is not read as ‘or’, it has been contended by the appellants that anomalies and absurdities, will arise. Referring to those anomalies and absurdities, it has been pointed out that that vacuumising with FFS machine is normally used for packing of meat and meat products whereas gas flushing system is used for packing vegetable and vegetable products. Either of the system is an accessory to the main machine. Both the systems can be imported as accessories, if an importer has, as his product range, both meat products and vegetable products like potato chips. Since the appellant is manufacturing only potato chips, it was, therefore, not considered necessary by him to import the accessory of vacuumising system. The vacuumising system is absolutely unsuitable for packing potato chips inasmuch as the vacuumising system would have made both the sides of the package stick together and thus, breaking the potato chips due to outside pressure. It could also never be the intention, as rightly pointed out by the appellant’s learned Advocate that the Government would have insisted for import of an accessory, if it is not needed by an actual user on account of his peculiar product range and thus, allowed the foreign exchange to go waste. I find considerable force in the aforesaid plea of the appellant’s learned Counsel. This plea is further fortified by the subsequent amendment No. 125/86, dated 17th February, 1986 by Notification No. 65/89-Customs, dated 1st March, 1989, allowing concessional rate of duty when FFS machine is imported either with vacuumising accessory or inert gas flushing accessory or with both the accessories.

Revenue’s main argument is reliance on Note 7 of Chapter 84 of the Tariff, whereas the learned Consultant Shri K. Srinivasan argued that Note 7 of Chapter 84 is subject to Section Note 3 of Section XVI. Note 7 of Chapter 84 and Section Note 3 of Section XVI are reproduced below :-

Note 7 of Chapter 84:

“7. A machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose.

Subject to Note 2 to this Chapter and Note 3 to Section XVI, a machine the principal purpose of which is not described in any heading or for which no one purpose is the principal purpose is, unless the context otherwise requires, to be classified in Heading No. 84.79. Heading No. 84.79 also covers machines for making rope or cable (for example, stranding, twisting or cabling machines) from metal wire, textile yarn or any other material or from a combination of such materials.”

Note 3 of Section XVI

“3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted to the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.”

As already mentioned above, Shri Srinivasan, the learned Consultant had argued that Note 7 of Chapter 84 is subject to Section 3 of Section Note 3 of Section XVI. Section 156 of the Customs Act, 1962 vests the power with the Central Government to make rules consistent with the Act generally to carry out the purposes of the Act and Section 157 of the Customs Act, 1962 relates to vest the Board to make regulations consistent with this Act and rules generally to carry out the purpose of the Act. For proper appreciation of the legal position, Sections 156 and 157 of the Customs Act, 1962 are reproduced below:-

“Section 156. General power to make rules. -

(1) Without prejudice to any power to make rules contained elsewhere in this Act, the Central Government may make rules consistent with this Act generally to carry out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :-

(a)      the manner of determining the price of imported goods under sub-section (1A) of Section 14;

(b)      the conditions subject to which accessories of, and spare parts and maintenance and repairing implements for, any article shall be chargeable at the same rate of duty as that article;

(c)      the precautions that shall be taken by the owner, his agent and the person-in-charge of any conveyance or animal for the purposes of sub-section (2) of Section 115;

(d)      the detention and confiscation of goods the importation of which is prohibited and the conditions, if any, to be fulfilled before such detention and confiscation and the information, notices and security to be given and the evidence requisite for the purposes of such detention or confiscation and the mode of verification of such evidence;

(e)      the reimbursement by an informant to any public officer of all expenses and damages incurred in respect of any detention of any goods made on his information and of any proceeding consequent on such detention;

(f)       the information required in respect of any goods mentioned in a shipping bill or bill of export which are not exported or which are exported and are afterwards re-landed;

(g)      the publication, subject to such conditions as may be specified therein, of names and other particulars of persons who have been found guilty of contravention of any of the provisions of this Act or the rules.”

157. General power to make regulations. -

(1) Without prejudice to any power to make regulations contained elsewhere in this Act, the Board may make regulations consistent with this Act and the rules, generally to carry out the purposes of this Act.

(2)  In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:-

(a)   the form of a bill of entry, shipping bill, bill of export, import manifest, import report, export manifest, export report, bill of transhipment, boat note and bill of coastal goods;

(b)   the conditions subject to which the transhipment of all or any goods under sub-section (3) of Sec. 54, the transportation of all or any goods under Sec. 56 and the removal of warehoused goods from one warehouse to another under Sec. 67 may be allowed without payment of duty;

(c)    the conditions subject to which any manufacturing process or other operations may be carried on in a warehouse under Sec. 65.”

Hon’ble Supreme Court had occasion to deal with the delegated legislation in the case of Subhash Photographies v. Union of India reported in 1993(05)LCX0029 Eq 1993 (066) ELT 0003 (S.C.). Para Nos. 14, 15, 16, 17, 18 and 19 from the said judgment are reproduced below :-

“14. There is another and perhaps more simpler answer to the attack upon the validity of the said Regulations. They are relatable not only to Section 157 of the Customs Act but more particularly to Chapter Note (2) of Chapter 98 of the Customs Tariff Act. Chapter Note (2) expressly states that the expressions used in Heading 98.01 shall have the meaning assigned to them in the said regulations. In accordance with the said Chapter Note, Project Imports Regulations have been made excluding “establishments designed to offer services of any description” from the purview of “industrial plant”. If the said regulations are good and valid, there can be no escape from what they say; the photographic equipment does not fall within the ambit of “industrial plant”. In this view of the matter, the relevance of the alleged legislative practice with respect to regulation making power, or of the situation obtaining prior to the framing of the said regulations, is very little. The express power conferred by Chapter Note (2) of Chapter 98 cannot be curtailed or abridged with reference to alleged legislative practice relating to regulation-making power, assuming that such a practice is established and is relevant. The only question which really arises is whether Chapter Note (2) amounts to excessive delegation of legislative power.

15. As rightly pointed out by Thommen, J. in Supreme Court Employees Welfare Association v. Union of India [1989 (4) SCC 187] “where the validity of a subordinate legislation (whether made directly under the Constitution or statute) is in question, the Court has to consider the nature, objects and scheme of the instrument as a whole, and on the basis of that examination, it has to consider what exactly was the area over which and the purposes for which power has been delegated by the governing law.”In statutes like Customs Act and Customs Tariff Act one has also to keep in mind that such legislation can be properly administered only by constantly adjusting it to the needs of the situation. This calls for a good amount of discretion to be allowed to the delegate. As is often pointed out “flexibility is essential (in law-making) and it is one of the advantages of rules and regulations that they can be altered much more quickly and easily than can Acts of Parliament.” We have pointed out hereinbefore the necessity of constant and continuous monitoring of the nation’s economy by the Government (and its various institutions) and the relevance of these enactments as a means of ensuring a proper and healthy growth. Looked at from this angle, we are unable to see any substance in the argument that Chapter Note (2) amounts to excessive delegation of the Parliament’s essential legislative function. Chapter 98 provides a concessional tariff inter alia to industrial plant. The expression “industrial plant” is a term of wide connotation. All kinds of industrial plants may not require to be encouraged. Some may; others may not. Decisions of this nature have to be made from time to time. Parliament cannot obviously do this. It has, therefore, left the function to the Board which, as emphasised hereinbefore, is in immediate direct charge of the administration of the Act, along with and subject to the guidance of the Central Government.

16. In Vasantlal Maganbhai Sanjanwala v. State of Bombay [1961 (1) SCR 341], it is observed by this Court that “self-effacement of Legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation”. At the same time, it is held, “it is for a court to hold on a fair, generous and liberal construction of an impugned statute whether the Legislature exceeded such limits. But the said liberal construction should not be carried by the Courts to the extent of always trying to discover a dormant or a latent legislative policy to sustain an arbitrary power conferred on executive authorities. It is the duty of the court to strike down without any hesitation any arbitrary power conferred on the executive by the legislature”. These words were quoted with approval in a subsequent decision of the Constitution Bench in Devidas v. State of Punjab [1967 (3) SCR 557].

17. Krishna Iyer, J. emphasised this very aspect in the context of a taxing statute in Avinder Singh v. Punjab [1979 (1) SCR 845]. The learned Judge said:

“.....the legislature cannot self-efface its personality and make over, in terms plenary, the essential legislative functions. The Legislature is responsible and responsive to the people and its representatives, the delegate may not be and that is why excessive delegation and legislative hara kiri have been frowned upon by constitutional law. This is a trite proposition but the complexities of modern administration are so bafflingly intricate and bristle with details, urgencies, difficulties and need for flexibility that our massive legislatures may not get off to a start if they must directly and comprehensively handle legislative business in all their plenitude, proliferation and particularisation. Delegation of such part of legislative power becomes a compulsive necessity for viability. If the 500 odd parliamentarians are to focus on every minuscule of legislative detail leaving nothing to subordinate agencies the annual output may be both unsatisfactory and negligible. The lawmaking is not a turnkey project, ready-made in all detail and once this situation is grasped the dynamics of delegation easily follow. Thus, we reach the second constitutional rule that the essentials of legislative functions shall not be delegated but the inessentials, however, numerous and significant they be, may well be made over to appropriate agencies. Of course, every delegate is subject to the authority and control of the principal and exercise of delegated power can always be directed, corrected or cancelled by the principal.”

18. Applying the principles aforesaid, we cannot say that the Parliament has, by empowering the Board to define the expression “industrial plant” occurring in Chapter 98, delegated its essential legislative function. Indeed, we see no self-abnegation on the part of the Parliament. The power conferred by Chapter Note (2) is undoubtedly different from the power of exemption conferred by Section 25. It makes little difference in principal that while an exemption notification is required to be laid on the floor of the Parliament. Regulations made under Section 157 are not so required. Absence of such requirement does not mean absence of control by the Parliament over the acts of the delegate. Nor are we satisfied that by excluding the industrial systems meant for establishments designed to offer services of any description, the Board has travelled beyond its brief. Reference may be had, in this connection to the decisions, of this Court in State of Tamil Nadu v. Hind Stone [1981 (2) SCR 742]. Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957 empowers the State Government to make rules for regulating the grant of quarry lease, mining lease and other minerals concessions in respect of minor minerals and purposes connected therewith. In exercise of the said power, the Government of Tamil Nadu framed Tamil Nadu Minor Mineral Concession Rules, 1959. Rule 8 of the Rules prescribed the procedure for lease of quarries to private persons. Rule 8(C), which was introduced in the year 1977, imposed a prohibition on the grant of lease of quarries in respect of black granite to private persons. The Rule provided that notwithstanding anything to the contrary contained in the said rules, no lease for quarrying black granite shall be granted to private persons on or after 7th December, 1977. It could be granted only to State Government or to a corporation wholly owned by it. The validity of Rule 8(C) was challenged on the ground that it travels beyond the purview of the Act inasmuch as the power to make rules conferred upon the State Government by Section 15 was meant for regulating the grant of quarry leases in respect of minor minerals but not for prohibiting it for creating a monopoly in itself (State Government). It was also argued that since the decision contained in Rule 8(C) involved a major change of policy, it could be done only by the legislature and not by a subordinate legislative body. Both these arguments were rejected. Following observations are apposite :

“.......It was pointed out by the Privy Council in Commonwealth of Australia v. Bank of New South Wales - and we agree with what was stated therein-that the problem whether an enactment was regulatory or something more or whether a restriction was direct or only remote or only incidental involved, not so much legal as political, social or economic consideration...Each case, it was said, must be judged on its own facts and in its own setting of time and circumstances and it might be that in regard to some economic activities and at some stage of social development, prohibition with view to State monopoly was the only practical and reasonable manner of regulation.

Another of the submission of the learned Counsel was that the G.O. Ms. No. 1312, dated December 2, 1977 involved a major change of policy, which was a legislative function and therefore beyond the competence of a subordinate legislating body. We do not agree with the submission. Whenever there is a switch over from ‘private sector’ to ‘public sector’ it does not necessarily follow that a change of policy requiring, express legislative sanction is involved. It depends on the subject and the statute. For example, if a decision is taken to impose a general and complete ban on private mining of all minor minerals, such a ban may involve the reversal of a major policy and so it may require legislative sanction. But if a decision is taken to ban private mining of a single minor mineral for the purpose of conserving it, such a ban, if it is otherwise within the bounds of the authority given to the Government by the Statute, cannot be said to involve any change of policy.”

19. The statement of law is clear and we agree with it respectfully. We are, therefore, of the considered opinion that Chapter Note (2) cannot be faulted as an instance of excessive delegation of essential legislative function nor can the Project Imports Regulations be faulted on the ground of travelling beyond the purview of the statute.”

The Tribunal in the case of Aravali Forgings Ltd. v. Collector of Central Excise, Jaipur reported in 1993(08)LCX0095 Eq 1994 (070) ELT 0693 (Tribunal) in para No. 23 had held as under:- .

“23. The other plea of the Id. CDR and other DRs had been that the goods should be classified under Chapter 84/85 by invoking Interpretative Rule 2(a). We wish to make it very clear that the Revenue has not based its case on this proposition and the question of examining this also would not arise. However, we would like to cite the Larger Bench decision in the case of Bharat Heavy Electricals Ltd. v. Collector of Customs, Madras [1987 (028) ELT 545] at para 11 had laid down.

“11. In view of the above discussions, we are of the view that no general and precise guidelines can be laid down regarding the consideration that should weigh as to when interpretative Rule 2(a) would be applicable for assessment and when assessment will have to be done without reference to this interpretative Rule 2(a) and a view has to be taken on the basis of facts of each case.”

In this case this point had not been urged by the Revenue at any time and we do not see any reason to examine it and hence we reject this plea. We also observe that this plea will not arise for our consideration, when a specific entry is to be found in the tariff.”

The Tribunal in the case of Rajasthan Synthetics Industries Ltd. v. Collector of Central Excise reported in 1989(03)LCX0012 Eq 1989 (042) ELT 0024 (Tribunal) in para No. 19 at page 28 had held as under :-

“19. According to Rule 1 of the Rules for the Interpretation of the Excise Tariff Schedule, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions in the said Rules. Thus, it is clear that the Rules for Interpretation will come into play, and can be invoked, if and only if the classification cannot be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided, such headings or Notes do not otherwise require. In other words, if the headings, read in the light of the Section or Chapter Notes, are clearly determinative of the classification, the Rules for Interpretation cannot be invoked. We have to see whether, in the present case, the classification can be determined having regard to the headings and the relative Section and Chapter Notes.”

Chapter 84 of the Customs Tariff Act relates to Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof and Note 7 of the said Chapter lays down that a machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose. Subject to Note 2 to this Chapter and Note 3 to Section XVI, a machine the principal purpose of which is not described in any heading or for which no one purpose is the principal purpose is, unless the context otherwise requires, to be classified in heading No. 84.79. Heading No. 84.79 also covers machines for making rope or cable (for example, stranding, twisting or cabling machines) from metal wire, textile yarn or any other material or from a combination of such materials. Note 7 clearly lays down that Chapter Note 7 is subject to Chapter Note 3 of Section XVI which provides that unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted to the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. In the matter before me, the principal function of the machine is that of printing and since printing is the principal function, in view of the above discussion and the case law discussed above, I am of the view that imported item falls under Heading 84.43. My view is also fortified by the decision of the Supreme Court in the case of Bharat Forge & Press Industries Ltd. v. Collector of Central Excise reported in 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (S.C.) in para No. 3 had held as under :-

“3. The question before us is whether the Department is right in claiming that the items in question are dutiable under Tariff entry No. 68. This, as mentioned already, is the residuary entry and only such goods as cannot be brought under the various specific entries in the tariff should be attempted to be brought under the residuary entry. In other words, unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary item.”

Learned sister Ms. Jyoti Balasundaram, Member Judicial has dealt at length the facts as to the working of the machine and as such, I need not reproduce the same. The principal function of the machine is of printing. The mere fact that it is a composite machine, it cannot be taken out from the heading of the printing. Accordingly, I am of the view that there is no violation of ITC regulations and the goods imported fall under Heading 84.43 as a printing machine as claimed by the appellant. In these circumstances, I agree with the findings of the learned sister Member Judicial and the points of difference referred to me are answered as under:-

(1)     Question No. 1 is answered in the affirmative to the effect that the appellants had described the goods correctly and completely in the bills of entry and other main documents at the time of importation.

(2)     Item imported is a composite machine.

(3)     Since principal function of the machine is printing and as such, the item is correctly classifiable under Heading 84.43.

(4)     The appellants are entitled to the benefit of Notification No. 114/80-Cus.

(5)     The import is covered under OGL.

(6)     The goods fall under OGL and under Heading 84.43 and also the benefit of Notification No. 114/80-Cus. is extendable to the appellants and as such, there was no justification for the confiscation of the goods and levy of penalty and as such, the impugned order is to be set aside and the appeal is required to be allowed with consequential relief as held by the Member Judicial.

53. In view of the above observations, I agree with the conclusions arrived at by the Member Judicial. Accordingly, I direct the Registry to place the matter before the regular Bench for passing appropriate orders in accordance with law.

FINAL ORDER

In view of the majority opinion the item imported is a composite machine classifiable under Heading 84.43 and entitled to benefit of Notification No. 114/80-Cus.

The goods were covered by OGL. There was no cause for confiscation of goods and imposition of penalty. As such the impugned order is set aside and the appeal is allowed with consequential relief if any due.

_______

Equivalent 2003 (162) ELT 1045 (Tri. - Del.)