1989 (6) TMI 70 - HC - Customs

Import for actual user by provisional registration certificate holder - PVC Electrical Insulating Films - Discrimination - Precedent

Issues Involved:
1. Whether the value declared by the petitioner is acceptable for the purpose of assessment.
2. Eligibility of the petitioner to claim O.G.L. Benefit as an Actual User under Serial No.121 of Appendix 6, List 8, Para I.
3. Whether the subject goods are to be assessed under Chapter 85.46 of the Customs Tariff Act or under Chapter 39.19 of the said Act.

Issue-Wise Detailed Analysis:

1. Acceptability of Declared Value for Assessment:
The Additional Collector of Customs ruled in favor of the petitioner on this issue. He observed that the contracts were made at different periods with a gap of about four months, and an increase in price from USD 2.50 to 2.80 per roll could not be anticipated. Therefore, it would not be proper to allege under-valuation given the facts of the case.

2. Eligibility for O.G.L. Benefit as Actual User:
The adjudicating authority concluded that there was no factory at the address declared in the provisional registration certificate issued by the Directorate of Cottage & Small Scale Industries, Calcutta. It inferred that the petitioner indicated a wrong address to circumvent the provisions of para 92 of the Import & Export Policy. The factory tenancy agreement was signed on 25th May 1987, while the goods were imported earlier in January and April 1987. The petitioner had already cleared one consignment, thus violating the Actual User Condition required for OGL benefit for a "proposed unit." As a result, a penalty of Rs. 50,000 was imposed, and the pending consignments were ordered to be confiscated with an option to redeem the goods on payment of a nominal fine of Rs. 25,000 each.

The petitioner challenged this finding, arguing that the Import Trade Control Order No. 1/85-88 allows Actual Users with provisional registration to import raw materials. They cited the Bombay High Court decision in Richardson Hindustan Limited v. Union of India & Anr., which supports the interpretation that provisional certificate holders can commence production and obtain bank loans or other facilities. The petitioner argued that the adjudicating authority's reliance on an undisclosed enquiry report was improper and that the provisional certificate allowed for the import of raw materials for production.

The court found that the Customs authorities' conclusion was not based on any evidence on record and was contrary to the Import Export Policy. The respondents had cleared goods for other importers on the basis of provisional certificates, indicating discriminatory treatment against the petitioner, violating Article 14 of the Constitution of India.

3. Correct Classification of Goods under Customs Tariff Act:
The petitioner contended that the subject goods, being PVC Electrical Insulating Films, should be assessed under Chapter 85.46, which covers electrical insulators of any material, rather than Chapter 39.19, which pertains to self-adhesive plates, sheets, film, foil, tape, strip, and other flat shapes of plastics. The adjudicating authority ignored this issue, but the court noted that the Excise Authorities assessed similar goods under Chapter 85.46, supporting the petitioner's claim.

The court referred to the decision of the Customs, Excise and Gold (Control) Appellate Tribunal, which held that electrical insulating tapes fall under H.No. 85.46, not H.No. 39.19. The Tribunal's decision is binding on the Customs authorities unless stayed or set aside by a competent court. The court concluded that the assessment under Chapter 39.19 was incorrect and that the subject goods should be assessed under Heading 85.46.

Conclusion:
The applications were allowed, and the adjudication order dated December 1, 1988, was set aside and quashed. The respondents were directed to assess the Bill(s) of Entry and release the goods upon payment of the Customs Duty within a specified timeframe.

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