1993 (6) TMI 92 - HC - Customs

Summary

Issues Involved:
1. Scope and extent of Exemption Notification No. 45/85-Customs.
2. Validity of the Certificates issued by the Directorate General of Technical Development (DGTD).
3. Interpretation of the term 'horological machine' in the context of the Notification.
4. Authority of Customs officials in determining the applicability of the Notification.

Detailed Analysis:

1. Scope and Extent of Exemption Notification No. 45/85-Customs:

The primary issue revolves around the scope and extent of Exemption Notification No. 45/85-Customs, dated 28-2-1985, issued under Section 25(1) of the Central Excises and Salt Act, 1944. The Notification prescribes concessional duty for horological machines and testing equipment imported for the manufacture or assembly of mechanical wrist watches or parts thereof and quartz analog wrist watches or parts thereof. The Notification imposes five conditions for availing the concession, which the petitioner claims to have met.

2. Validity of the Certificates Issued by DGTD:

The petitioner, a leading manufacturer of Quartz Analog watches, obtained the necessary Certificates from the DGTD, as required by the Notification. The Customs Authorities initially permitted the importation of goods at a concessional rate based on these Certificates until 1989. However, a decision at the Tariff Conference of the Collectors of Customs led to a different interpretation, resulting in the denial of concessional rates for the machines imported in 1989 and 1990.

The respondents argued that the Certificates issued by the DGTD are not final and that the Customs authorities have the ultimate authority to decide on the applicability of the Notification. However, the court held that the Certificates issued by the DGTD should be given due weight and that the Customs authorities do not have the right to sit in appeal over these Certificates unless there is evidence of fraud or mistake.

3. Interpretation of the Term 'Horological Machine':

The respondents contended that the term 'horological machine' should refer only to machines directly employed in the assembly or production of watches or watch components. They argued that the imported machines, which could be used for other purposes, did not satisfy the first part of the Exemption Notification.

The court, however, disagreed with this narrow interpretation. It held that the main part of the Notification does not suggest that the machines and equipment must be exclusively meant for the manufacture or assembly of wrist watches or parts thereof. The mere fact that the machines can also be used for other purposes does not disqualify them from the concessional rate. The court supported this view by referring to Conditions No. 4 and 5 of the Notification and a similar judgment by the Bombay High Court.

4. Authority of Customs Officials in Determining Applicability:

The respondents argued that the Customs authorities have the final say in determining the applicability of the Notification and that they are entitled to take a different view from that of the DGTD. However, the court held that once the petitioner complies with the conditions of the Notification and obtains the necessary Certificates from the DGTD, the Customs authorities cannot deny the benefit of the Notification. The court emphasized that the Customs authorities cannot sit in judgment over the Certificates issued by the DGTD unless there is evidence of fraud or mistake.

Conclusion:

The court quashed the impugned orders denying concessional rates and allowed the writ petitions. It directed the respondents not to overrule or ignore the Certificates issued by the DGTD and to grant the benefit of Notification 45/85 if the petitioner complies with the conditions. The reliefs prayed for in W.P. Nos. 15313 and 15314 of 1990 were modified to meet the ends of justice, directing the respondents to adhere to the Certificates issued by the DGTD and the conditions of the Notification. No order as to costs was made in all the writ petitions.