THE BRITISH MACHINERY SUPPLIES CO. v.

THE UNION OF INDIA AND ORS.

AUGUST 6, 1996

[S.P. BHARUCHA AND K.T. THOMAS, JJ.]

Customs Act, 1962-Tariff Schedule items-84.2/84.4(1~Imp01t of components of industrial sewing machine rotating hooks with bobbin C case-Higher duty charged treating the goods as components of domestic sewing machines-Appellate Collector held that goods imported are not for do111estic sewing 1nachines-Revision-Govenunent of India annulled of order Appellate Collector-Held, the Govemment of India have wrongly exercised revisional power by inte1fering with the decision of the Appellate Collector-Order set aside.

The appellant firm was engaged in manufacturing sewing machines and accessories. It imported components of industrial sewing machines, which were liable to customs duty at the rate of 40% as per item 84.41(1) of the Customs Tariff Schedule. The Assistant Collector of Customs charged higher duty treating the goods as compone:its for domestic sewing machines - under clauses (2) item 84.2. Appellant paid higher duty &nd applied for refund Application made before Assistant Collector was rejected. The statutory appeal before the Appellate Collector of Customs was allowed on the ground that the goods imported were not for domestic

se\\ing machines. Since excess amount paid was not refunded, the appel- F Ian! filed a writ petition in the High Court for appropriate directions. In the meantime, the Government of India in exercise of its revisional power annulled the order passed by the Appellate Collector of Customs. Hence the present appeal.

The contention of the appellant was that the Central board of Excise G and Customs had clarified that the ordinary sewing machines used in the house or-by tailors or dress makers etc., to be manned by manual labour

- or whiCh have less then 1/4 HP would continue to be considered as domestic sewing machines. It was further contended that the Government of India had gone beyond its powers in interfering with the findings of fact H arrived at by the Assistant Collector. 294 .-._ -

BRITISH MACHINERY SUPPLIES CO. v. U.0.1. 295

The respondents contended that classification as per tariff cannot be A determined on the basis of what the Collector of Central Excise and Customs or the Board of Central Excise would have thought about it because it is a legislative process and its interpretation should be in accordance with law. It "as further contended that a particular horse power for the motor attached to the machines may or may not be decisive in coming to the conclusion that the component is principally used for domestic se"ing machines.

Allowing the appeal, this Court

HELD : 1. The Government of India had wrongly exercised its revisional powers by interfering with the decision of the Appellate Collector that the goods imported were not for domestic sewing machines and as such they were classified under Item 84.41(1) of the Schedule. (300-E-F; 297-A]

2. The very licence granted to the appellant contains a description which cannot normally be marginalised in reaching a conclusion on this disputed aspect. A list of components to bt imported during the licensing D period is appended with the licence. it starts with the description that the components are for industrial sewing machines. The first item in that list is "rotating hooks complete with bobbin case" which is the component involved in this case. (298-E-F]

3. The circular issued by Central Board of Excise and Customs cannot be over looked. It is binding on the department as they have made it known to all concerned that sewing machines .covered by motors of 1/4 HP or more would fall outside the scope of the term "domestic sewing machines". The relevant heading in the tariff i.e. 84.41 uses the expression "domestic sewing machines,, and put all the other sewing machines in the residuary category "not elsewhere specified". When the Customs officials themselves have understood that sewing machines designed for operation powered by motor of 1/4 HP or more would fall outside the scope of domestic sewing machines, it would be inept to suggest that they should adopt a different stand when mulcting the importer with duty unless there is a judicial pronouncement on the matter. (299-D-F]

Para Enginee1ing Works, New Delhi v. Collector of Customs, New Delhi,

(1987) 27 ELT 668, approved.

Nutsteel Equipment P1ivate Limited v. Collector of Central Excise,

(1988) 34 ELT 8 Viswa & Co. v. State of Gujarat, 17 STC 581, referred to.

A Universal Encyclopaedia of machines, (Vol. I) referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3035 of 1979.

From the Judgment and Order dated 24.8.79 of the Government of India Ministry of Finance (Department of Revenue and Expenditure), North Block, New Delhi in Order No. 91-B of 1979.

M.L. Verma, Mrs. Rani Chhabra for the Appellants.

C J. Vellapally, V.K. Verma and G. Prakash for the Respondents.

The Judgment of the Court was delivered by

THOMAS, J. This appeal by special leave is in challenge of an order passed by the Government of India, in exercise of their revisional power D under the Customs Act. 1962 (for short 'the Act'). As per the impugned order Government annulled the order passed by the Appellate Collector of Customs in favour of the appellant on 6.12.1978.

Facts are, in brief, these :

Appellant firm has a factory for manufacturing sewing machines and accessories at Faridabad, with an approved capacity for making both domestic as well as industrial sewing machines. Appellant imports components for manufacturing such sewing machines from foreign suppliers.

In October, 1977, appellant imported components of industrial sewing machines- 11rotating hooks complete with bobbin case", some of which required 1/3 H.P. and the others required 1/2 H.P. for their operation.

According to appellant such imported components were dutiable at the rate of 40 per cent to customs duty as per item 94.41(1) of the Customs Tariff Schedule and hence appellant was payable customs duty in accordance with its. But the Assistant Collector of Customs (foreign Post), New G Delhi charged higher duly by treating those goods as components for domestic sewing machines as prescribed under clause (2) of heading 84.2 of the Schedule. Appelfont paid the higher duty under protest and got the goods released and later applied for refund of the excess amount paid (i.e.

Rs. l,78,208). The Assistant Collector rejected the application reiterating H that the goods imported were components for domestic sewing machines.

BRITISH MACHINERY SUPPLIES CO. v. U.O.l. [TifOMAS, J.J 297

Appellant then filed a statutory appeal before the Appellate Collector of Customs who allowed the appeal holding that the goods imported were not for domestic sewing machines and as such they were classifiable under item 84.41(1) of the Schedule. Thus the appellant became entitled to refund of the amount paid in excess. But appellant failed to get the refund applied for, inspite of pursuing the applications filed for that purpose. So a writ petition was filed in the High Court of Delhi for appropriate directions. Notice was served on the Central Government They proposed to review the order for which a notice was given to the appellant to show cause why it should not be reviewed. Appellant submitted its detailed reply. Central Government after hearing the appellant passed the impugned order.

Appellate Collector concurred with the importer's stand that the components were intended for industrial sewing machines on the strength of a variety of reasons and on its own satisfaction when the difference was demonstrated before him, during the time of hearing. He noticed that "the rotating hook in the industrial machine had higher speed than the domestic sewing machine and if the rotating pin of the industrial sewing machines were to be attached to the domestic se\ving machines, it would not withstand the speed and would break." Appellate Collector, therefore, was convinced that the hooks imported by the appellant were not for domestic sewing machines and were "solely and principally for use in machines operated with more then 1}4 H.P. and as such are classifiable under !CT 84.41(1)".

Government of India differed from the above conclusion, mainly on the premises that (1) "the rotating hooks complete with bobbin case" find their use in domestic as well as other sewing machines, but their principal

use lies in domestic sewing machines, (2) the term sewing machine should have been understood in the manner it is understood in international market/trade for purposes of customs classification, and (3) the correspondent heading in the Brussels Tariff Nomenclature (BTN) covers two types G of sewing machines, namely, (a) ordinary sewing machines used in homes or by tailors or dress-makers etc., (b) special machines which can be used only for certain other kinds of sewing (as enumerated therein).

Learned counsel for the appellant contended that the Government H

298 SlJPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

of India have gone far beyond its powers in interfering with a fact finding arrived at by the Appellate Collector for which many extraneous materials were improperly used. At any rate the view adopted by the Appellate Collector should have been accepted as a reasonable conclusion on the facts, according to the counsel.

Item 84.41 of the Customs Tariff Schedule, which was brought into force of 1.1.1977, read thus :

"84.41 -Sewini; machines; furniture specially designed for sewing 1nachines; sewing machine needles;

(l) Not elsewhere specified - 40%

(2) Domestic sewing machines - 100';7,,

If the imported components were for domestic sewing machines then the Central Government is right in insisting on the customs duty realised from the appellant. The language in which the item in the schedule is couched indicates that one category relates to a specific specie i.e. "domestic sewing machines", and the other is a general category i.e.

11not elsewhere specified". Apparently the burden is on the revenue if they want to include the imported materials with the specific category to substantiate E that those materials are such.

The very licence granted to the appellant contains a description \vhich cannot normally be marginalised in reaching a conclusion on thKs disputed aspect. A list of components lo be imported during the licensing period is appended with the licence. It starts with the description that the F components are for industrial sewing machines. The first item in that list is "rotating hooks complete with bobbin case" which is the component involved in this case.

In the Letter of Credit, granted by the Foreign Exchange Branch of syndicate Bank under which the components were imported, the com- G modities are described as components of industrial se\ving machines. learned counsel for the appellant produced a letter dated 8.2.1977, which was addressed to G1e Collector of Customs and Central Excise, New Delhi, by the Central Board of Excise and Customs, Copy of which had been forwarded to the subordinate officers. The letter contains a reference to H the minutes of the conference of Collectors of Customs on tariff classifica-

BRITISH MACHINERY SUPPLIES CO. v. U.O.l. [IBOMAS, J.] 299

tion matters, held in November, 1976, in which the Board of Central Excise and Customs agreed that "the ordinary sewing machines used in the home or by tailors, dress-makers etc. to be worked by manual labour or which require for their operation less than 1/4 H.P. may continue to be considered as don1estic se\ving machines whereas 'industrial sewing machines' essentially designed for operation powered by motors of 1/4 H.P. or more would fall outside the scope of term 'domestic sewing machines', " Much reliance is sought to be made on this circular. The only conclusion that can be arrived at, if the said circular as any use, is that the imported materials in this case are usable for industrial sewing machines.

Shri Joseph Vellapally, learned senior counsel who argued for the C respondents, contended that classification as for tariff cannot be determined on the basis of what the Collectors of Central Excise & Customs or even what the Board of Central Excise and Customs would have thought about it because it is a legislative process and its interpretation should be in accordance with law. We cannot overlook the said circular which is, at D least, binding on the department as they have made it known to all concerned that sewing machines covered by motors of 1/4 H.P. or more would fall outside the scope of the term

11domestic sewing machines 11 • It must be borne in mind that the heading concerned in the tariff i.e. 84.41 uses the expression "domestic sewing machin'Cs" and put all the other sewing machines in the residuary category "not elsewhere specified", when E customs officials themselves have understood that se\\ing machines designed for operation powered by motor of 1/4 H.P. or more would fall outside the scope of domestic ewing machines, it would be inept to suggest that they should adopt a different stand when mulcting the importer with duty unless there is a judicial pronouncement on the matter.

Learned counsel for the respondent invited our attention to a reference made in the Universal Encyclopedia of Machines (Vol.1) to the effect that the present day domestic sewing machine is usually driven by an electric motor. Hence it was contended that a particular horse power for the motor attached to the machines may or may not be decisive of the G question whether a component is principally used for domestic sewing machines. True that horse power is not the only factor to determine it.

Learned counsel for the respondent invited our attention to a decision of this Court in Nat Steel Equipment Private Ltd. v. Collector of H

A Central Excise, 1988 (34) ELT 8, where this Court was concerned with

"domestic electrical appliances" mentioned in explanation I of Tariff Item 33 (c) which was in force at the relevant time. Their Lordships referred to an earlier decision of the Gujarat High Court in Viswa & Co. v. State of Gujarat, 17 STC 581 in which Bhagwati, J. (as the learned Chief Justice

then was) has observed that to make an electrical appliance a domestic electric appliance "what is necessary is that it must be of a kind which is generally used for household work". But in this case there is no material to show that a sewing machine fitted with the type of components imported by the appellant is generally used in household work.

We find that the observations made by the Special Bench of CEGAT in Para Enginecn.ng works, New Delhi v. Collector of Custonis, New Delhi,

(1987) 27 ELT 668, as more appropriate to the facts of this case. A manufacturer, importing to some components of industrial Fewing machines with a motor of 1/4 H.P. had to approach the Special Bench as a similar question was raised by the customs officials. The Tribunal noted D that each Bill of Entry pertaining to the import in that case contained reference to the invoices which were properly co-related with the bills.

Those documents contain the description that the components were for industrial se\ving machines. \ssessment made under a different item inspite of such invoices was held. to be unsustainable. The position in this E case is almost similar. \

From the above discussion we come to the conclusion that Government of India ha•; e wrongly exercised revisional powers by interfering with the decision of the Appellate Collector. We, therefore, allow the appeal anJ set aside the impugned order. There shall be no order as to costs.

I / '

S.V.K.I.

Appeal allowed. :' i I