1 mgj IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Writ Petition No. 864 of 1988 Messrs Kamal Traders, a ) partnership firm ) registered under the ) provisions of Indian ) Partnership Act, 1932 ) having its office at 401 ) Dalamal Tower,211,Nariman ) Point, Bombay 400 021 ) ..Petitioners vs. 1The Collector of Customs) Bombay having his office) at New Customs House, ) Ballard Estate,Bombay 38) 2 The Assistant Collector) of Customs, Special ) Investigation and ) Intelligence Branch ) having his office at ) New Custom House, Annex) building, 10 th floor, ) Ballard Estate, ) Bombay 400 038 ) 3 Union of India ) ..Respondents Mr.N.S.Thakkar for petitioners Mr.P.S.Jetly for respondents. CORAM: V.C.DAGA AND K.K.TATED JJ 23rd February,2010 2 J U D G M E N T (Per V.C.Daga J.) 1 This petition filed under Article 226 of the Constitution of India is directed against an order dated 20 th January, 1988 (Exh.M) passed by the Additional Collector,Customs, New Custom House, Bombay 400 036 confiscating the goods in exercise of powers under section 111(d) of the Customs Act, 1962 (Customs Act for short) with further option to redeem the goods for home consumption on payment of Rs.3,30,000/- with further penalty in the sum of Rs.1,15,000/- on the present petitioners and Rs.1,15,000/- on M/s Fedders Lloyd Corporation Ltd., New Delhi in terms of section 112(a) of the Customs Act. THE FACTS 2 The factual matrix reveals that the petitioners sought to import the consignment of Compressors for Air Conditioners for the value of Rs.6,69,505.50 against Bill of Entry 3 No.2523/1236 (M-V Maerkicle-mentine) against six Import Licences bearing different dates endorsed in terms of para 51(iii) of the Import Export Policy 1985-88 permitting importation of Non-OGL Capital Goods to eligible actual users (industrial) in terms of para 263(A) of AM 85-88. The petitioners sold these goods on High Seas to M/s Fedders Lloyd Corporation Pvt. Ltd., who were eligible actual users (Industrial) for manufacture of air conditioners against their import licence which was valid for importing capital goods. 3 A show cause notice dated 8 th January, 1988 was issued by the Assistant Collector of Customs, Bombay alleging therein that the capital goods were required by the importer to manufacture air conditioners; that the imported compressors were never used or could not have been used as capital goods other than input for manufacturing air 4 conditioners or heat pumps or appliances designed for high evaporating temperatures. The show cause notice further stated that the imported compressors used in the manufacture of end products as components and as such they were not capital goods and the same could not have been imported as non OGL goods. The licence against which the importation was made was valid only for capital goods. Therefore, the compressor which was component of the end product namely air conditioner was not covered by the licence. The importation was, therefore, unauthorized in absence of any other valid licence. It was also alleged in the show cause notice that the import was in contravention of the Government of India Import Control Order No.17/55 dated 7 th December, 1955 issued under section 3 of the Import and Export (Control) Act, 1947. The noticees were called upon to furnish 5 explanation to the show cause notice. 4 The petitioners filed their reply to the show cause notice contending that the compressors were capital goods and that the petitioners were entitled to import the same against the licence held by them. 5 The aforesaid submission did not find favour with the adjudicating authority. The Adjudicating Authority after hearing the parties found that the imports made by the petitioners were not in accordance with the import and export policy. The findings recorded in this behalf read as under: I have gone through the records of the above case and have carefully considered the submissions made by the importer and the High Sea Buyers. No doubt, the item is specific in the Licence List, but licence also mentions In terms of para 51(iii) of AM 85-88 . Para 51(iii) stipulates the policy for import of NON-OGL Capital goods by Export Houses and the manner of disposal to Actual user (Industrial) as laid down in para 263(4). The most important words here are capital goods . The short point for consideration here is whether or not the compressors purchased on High 6 Seas by Fedders Lloyds from M/s Kamal Traders, the importer, are capital goods for the actual users M/s Fedders Lloyds. The answer is no. In their own admission, these compressors are to be used in the manufacture of air conditioners which are to be sold in the market. Since compressors in question are to be used as components for the manufacture of air conditioners for which M/s Fedders Lloyds are registered as manufacturer these cannot be considered as capital goods. Capital goods means any plant, machinery, equipment or accessories required by an investor for production of goods or for rendering services, including those required for replacement or expansion. Capital goods for actual users would be the machines installed in their factory for production of goods or for rendering services. As such, compressors to be installed in the factory premises of Actual Users would be in the natural of capital goods and would only fall in the category of capital goods covered under para 51(iii) of the Policy and not those which are used as components of the products manufactured by them. Even para 263(4) makes a distinction between manner of disposal of capital goods which is covered by sub-para (i) and that of components etc. which is covered by sub para (ii). The impugned goods, therefore, are not covered by licences submitted by importer and 7 are liable for confiscation under section 111(d) of the Customs Act 1962 read with section 3(2) of the Import and Export Act, 1947. M/s Fedders Lloyds and M/s Kamal Traders, have knowingly imported and attempted to clear the compressors as capital goods knowing fully well that they are going to use them as components, they are liable to penal action under sec.112(a) of Customs Act, 1962. Since Kamal Traders purchased the goods even before the order for the goods was placed they have aided and abetted in the un-authorised import. 6 Not satisfied with the aforesaid adjudication order the present petition was preferred by the petitioners to challenge the said order. SUBMISSIONS 7 Mr.Thakar, learned Counsel appearing for the petitioners urged that the goods imported by the petitioners, namely, compressors for air conditioners and refrigerators are specifically covered by the licence issued by the licensing authority. According to him, it is well 8 settled that once the licence is issued by the licensing authority then the customs authorities cannot go behind the issuance of licence. The reliance was placed on the judgment of the Apex Court in the case of Titan Medical Systems Pvt.Ltd. Vs. Collector of Customs, New Delhi reported in 2003(151) E.L.T.254(S.C.) and Lokash Chemical Works Vs. Collector of Customs reported in 1981(8) ELT 235 (Bom) 8 Mr.Thakkar further urged that the Joint Commissioner Customs, Import and Export, the proper officer under the EXIM Policy having clarified that the goods imported by the petitioners were permissible for import against the licences presented by the petitioners, the said interpretation of the licensing Authority on matters relating to EXIM policy was binding on the customs authorities. As such the impugned action of 9 the customs authority is without authority of law. In support of this submission, reliance is placed on Atul Commodities Pvt. Ltd. Vs. Commissioner of Customs reported in 2009(235) ELT 385(SC) and MJ Exports Vs.CEGAT reported in 1992(60) ELT 161 (SC). Mr.Thakkar further urged that the customs authorities have in past permitted imports of identical goods under the very same licences as such impugned action of the customs authorities is arbitrary and discriminative. 9 Per contra, Mr.Jetley learned Counsel appearing for the revenue urged that it is not in dispute that the compressors imported against the said licence were to be used in manufacture of air conditioners which were to be sold in the open market. Since the compressors in question were to be used as components for manufacture of air conditioners by M/s Fedders Lloyed 10 Corporation Pvt.Ltd, a registered manufacturer, the compressors imported against subject licence could not be considered as capital goods. 10 In the submission of Mr.Jetly, capital goods means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernization, technological up-gradation or expansion. Capital goods for actual users would be machines installed in their factory for production of goods or for rendering services. By way of illustration, he illustrates that the compressors to be installed in the factory premises for actual use can be called as capital goods and would fall within the category of capital goods under para 51(iii) of the exim policy and not those which are used as components 11 of the products manufactured by manufacturer. He thus submits that the impugned order passed by the adjudicating authority is legal and valid and needs no interference. CONSIDERATION: 11 In order to appreciate the rival submissions advanced, it is necessary to reproduce the definition of capital goods . The capital goods defined under the EXIM Policy reads as under: Capital Goods means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological up-gradation or expansion. Capital goods also include packaging machinery and equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal, husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well 12 as for use in the services sector. Having seen the definition of capital goods, the said definition of capital goods is very wide. The capital goods can be machines, machinery, plant equipment, apparatus, tools or appliances. Any of these goods, if used for producing or processing of any goods or for bringing about any change in any substance OR for the manufacture of final produce would be capital goods. It is, therefore, clear that the user will determine whether the item imported would fall within the swipe of capital goods. 12 In the case in hand the goods namely compressors were not used in the plant for manufacturing goods or rendering services. The said compressors were to be used as input in manufacture of end product i.e. air conditioners which were to be sold in the market. In other words, the compressors which were imported were to be consumed in the 13 manufacture of end product, namely; air conditioners. They were used as an input as such adjudicating authority was perfectly justified in holding that they were not capital goods and imports thereof were not legal and valid. 13 One more aspect which needs to be taken into account is that the show cause notice is a composite to the petitioners as well as M/s Fedders Lloyd Corporation Pvt. Ltd. The Adjudication order is common order passed based on identical facts and common defence. The petitioners M/s Kamal Traders, Bombay and M/s Fedders Lloyd Corporation Pvt. Ltd., both were saddled with penalty in the sum of Rs.1,15,000/- each. It was a joint and indivisible order based on inseparable and individual findings. There is no material on record to show that penalty imposed on M/s Fedders Lloyd Corporation Pvt.Ltd. was at any time set aside by the competent authority. In 14 absence of any material on record, one has to presume that the order against M/s Fedders Lloyd Corporation Pvt. Ltd. has become final and conclusive. If that be so, in one lis there cannot be two inconsistent orders. On this count also the petition deserves to be dismissed. 14 In the result the petition is dismissed. Rule is discharged with no order as to costs. (K.K.TATED J.) (V.C.DAGA J.)