1991 (3) TMI 152 - HC - Customs

Issues Involved:

1. Interpretation of para 54B(iii) of the Import Policy of 1978-79 regarding mechanical seals.
2. Consideration of each type and size of mechanical seal as a different item for import.
3. Treatment of mechanical seals as separate items of spare under the Import Policy.
4. Application of the more favorable interpretation of para 54B(iii) to the applicant.
5. Imposition of fine in lieu of confiscation despite no intent to infringe regulations.
6. Liability to pay fine following the Hindustan Steel Limited case precedent.

Detailed Analysis:

Issue 1: Interpretation of para 54B(iii) of the Import Policy of 1978-79 regarding mechanical seals

The court examined whether each type and size of mechanical seal imported should be treated as a single item. The Tribunal had previously ruled that mechanical seals of various sizes and types should be treated as a single item, similar to ball and roller bearings. However, the court found that the mechanical seals, being precision tailor-made and not interchangeable, should be treated as separate items. The court emphasized that the seals were specific to their corresponding sizes and specifications in acid pumps, thus each type and size should be considered a distinct item.

Issue 2: Consideration of each type and size of mechanical seal as a different item for import

The court concluded that each mechanical seal, due to its unique size and specification, should be treated as a separate item. The Import Policy allowed the import of single non-permissible spares up to Rs. 50,000/- each. Since the mechanical seals imported were of different sizes and specifications, they could not replace each other and should be considered individually. The court noted that the total value of the imported goods was Rs. 1,49,980/-, but each individual item did not exceed the Rs. 50,000/- limit.

Issue 3: Treatment of mechanical seals as separate items of spare under the Import Policy

The court referred to the definition of "spares" in sub-para 11 of para 5 of the Import Policy, which defines a spare as a part or sub-assembly for substitution. The court found that each mechanical seal imported was a spare meant to replace an identical part in the acid pumps. Therefore, each seal should be treated as a separate item. The court emphasized that the mechanical seals were precision tailor-made and could only be used in their corresponding sizes and specifications, reinforcing the argument that they should be considered distinct items.

Issue 4: Application of the more favorable interpretation of para 54B(iii) to the applicant

The court held that in cases of reasonable doubt, the interpretation most beneficial to the subject should be adopted. Since there were two possible interpretations of para 54B(iii), the court favored the one that was more favorable to the applicant. The court concluded that each mechanical seal should be treated as a separate item, and the import was valid and justified under the Import Policy.

Issue 5: Imposition of fine in lieu of confiscation despite no intent to infringe regulations

The court considered whether any fine should be imposed given that the applicant had no intention to infringe the Import Trade Control Regulations. The court noted that the applicant had fully disclosed the description of the imported spares and believed in good faith that each item would be treated as a single unit. The court found no deliberate violation and concluded that no penalty or fine should have been imposed.

Issue 6: Liability to pay fine following the Hindustan Steel Limited case precedent

The court referred to the Hindustan Steel Limited case, which established that penalties should not be imposed for technical or unintended violations. Given that the applicant had no intention to contravene the Import Policy and the value of the imported goods was within the prescribed limit, the court held that no fine should be imposed. The court answered the fifth and sixth questions in the negative, further supporting the applicant's case.

Conclusion:

The court answered questions 1 to 4 in the affirmative, supporting the applicant's interpretation of the Import Policy. Questions 5 and 6 were answered in the negative, indicating that no fine should be imposed. The court found that the import was valid and in accordance with the law, and there was no deliberate violation by the applicant. There was no order as to costs, and the judgment was concurred by both judges.

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