1991 (8) TMI 102 - SC - Customs

Whether the Tribunal s inference that the main frame does not include any components other than a frame was justified? Whether there were various violations of the terms of the licence? Held that - The matter must be sent back to the Tribunal for being considered afresh. From the facts stated earlier it will be seen that the amounts of fine and penalty are very substantial even after the reductions granted by the Tribunal. While the Collector has passed very detailed orders the Tribunal has disposed of the matter more briefly. In examining the correctness of the order of the Tribunal two aspects have to be kept in mind (i) the nature or extent of violation of the terms of the licence by the appellants and (ii) the quantum of the redemption fines and penalties. So far as the former is concerned the Tribunal has been somewhat cryptic. The Tribunal however has concentrated on only one of these items namely main frame perhaps by way of illustration. Therefore it does appear that some of the components (such as cover glass and some of the components imported by the assessee) were not covered by the licence it is not quite clear to what extent the components claimed by the assessee to form part of the main frame or drum assembly are not covered by the licence. Thus the case require a second and a closer look if not with a view to give complete relief to the assessee at least to determine a reasonable quantum for the redemption fines as well as the penalty. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Validity of the import licence.
2. Nature and extent of violation of the terms of the licence.
3. Quantum of redemption fines and penalties.

Detailed Analysis:

1. Validity of the Import Licence:
The appellant company applied for a licence to import components, accessories, and consumables for plain paper copiers under a technical collaboration agreement with Nashua Corporation, U.S.A. The licence granted allowed the import of items valued at Rs. 3.73 crores. The controversy primarily centered around the import of "copier frames" valued at Rs. 1.27 crores. The Collector of Customs concluded that the appellant had violated the terms of the licence by importing complete assemblies and parts not listed in the licence, resulting in heavy penalties and fines.

2. Nature and Extent of Violation of the Terms of the Licence:
The Collector of Customs found that the appellant imported a complete assembly of parts, including "mounted PCB assemblies, lens systems, halogen lamps, auto-transformer units, power supply units, exit rollers, drum shafts, blowers, motors, gears, capacitors, relays," and other small parts not listed in the licence. The appellant was accused of importing 100% of the parts of the photocopying machine, with 70% assembled with the main frame and the remaining 30% easily assembled. The charge was that the appellant imported complete photocopier machines contrary to the phased development programme (PDP) under which the goods were imported.

The Tribunal upheld the Collector's findings, stating that the items listed in the licence did not cover the imported components. They rejected the argument that the main frame includes several other components, asserting that the licence was for non-electric items and the items were clearly mentioned. The Tribunal concluded that the import of components not covered by the licence justified confiscation under Section 111(d).

3. Quantum of Redemption Fines and Penalties:
The Collector imposed substantial fines and penalties, which were reduced on appeal by the Tribunal. The Tribunal dismissed the appeals regarding the validity of the licence but allowed them on valuation issues. The Tribunal agreed with the appellant that extraneous considerations like the phased manufacturing programme should not be taken into account in interpreting the licence. They also accepted that no mutuality of interest had been established between the importers and suppliers, rejecting the concept of 'related person' in valuation.

The Supreme Court found that the Tribunal's analysis was somewhat cryptic and lacked clarity on the extent of items not covered by the licence. The Court noted that the values of the imported components, particularly the "copier frame," were not clearly understood. The Court emphasized that the customs authorities should have consulted the import trade control authorities for technical nomenclature clarification. The Court also noted the absence of action by the import trade control authorities against the appellant.

Conclusion:
The Supreme Court concluded that the matter required a second and closer look to determine a reasonable quantum for the redemption fines and penalties. The orders of the Tribunal were set aside, and the Tribunal was directed to reconsider the issues in light of the Court's observations and dispose of the appeals afresh. The appeals were allowed to the extent indicated, with no order as to costs.