9911796707
TMI Blog1991 (3) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pharmaceuticals Limited (the appellants herein) imported a consignment of 47 Haemodialysis machines, spares and accessories. Among the goods were 6 units of Water Treatment Plant, one Reverse Osmosis unit and one Water Softening unit. A bill of entry No. 12896/7 dated 18-11-1987 was filed for clearance of the goods. The benefit of Open General Licence in terms of Serial Number 16, List 2 ofAppendix-6 of the Import Policy 1985-88, as also of duty exemption in terms of Serial Number 8, Part-B of Customs Notification No. 208/81, dated 22-9-1981, as amended by Notification No. 66/87, dated 1-3-1987, was claimed. The haemodialysers, with spares and accessories, except the six water treatment plants, one reverse osmosis unit and one water softening unit were released as claimed. The goods which were not considered as eligible for release as claimed were valued at Rs. 49,19,284 CIF. They could not be considered as spares and accessories of haemodialyser. The appellants executed two bonds with bank guarantees, on 31-12-1987, for duty and licence purposes. One bond was for production within two months or such extended period as may be allowed, of a certificate from the Director General of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the DGHS and the CCIE. The bank, was, therefore, called upon to pay a sum of Rs. 44,27,356 and Rs. 24,59,642 in terms of the two guarantees executed by them failing which, it was stated, action under Section 142 of the Customs Act would be initiated against them for recovery of the said amount. According to the appellants, this letter was followed by two further letters dated 11-3-1988 and 21-3-1988 to similar effect from the Assistant Collector. On 21-3-1988, the appellants approached the Collector and confirmed in their letter of the same date that in the event of their failure to produce the certificate from the DGHS on or before 28-3-1988, they would make payment of Rs. 68,86,998 on 28-3-1988 before 12 noon by a bankers cheque. . 4. The DGHS issued a certificate on.24-3-1988 stating that the reverse osmosis machine was an important functional component, essential for a functional dialysis unit. On 25-3-1988, the appellants wrote to the Collector enclosing a copy of the certificate and stating that the authority that issued the certificate had informed them that the expression Reverse osmosis machine would cover all the goods in question as specified in the bonds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the CCI E, Udyog Bhavan, New Delhi for further clarification in the matter . 5. On 25-4-1988, the Assistant Collector wrote to the appellants with a copy to the bank stating that the certificates issued by the DGHS were not acceptable. The letter further states that there was evidence available with the department to show that the water treatment plant, reverse osmosis unit and water softening unit were not parts or accessories of haemodialysis machines and that these were not life saving equipments. It was also stated that water treatment plants which are required for softening hard water for use with haemodialysis units were manufactured in India. It ended by calling upon the appellants to pay the bond amounts immediately. By a copy of the letter to the bank, it was called upon to pay the amount in terms of the guarantees executed by them. On 27-4-1988, the appellants wrote to the Assistant Collector (with a copy to the bank requesting it not to pay the amount) stating that if the department had evidence to show that the goods in dispute were not parts or accessories of haemodialysers as claimed by the appellants, it was the bounden duty of the department to disclose that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in a position to give a suitable reply. A fortnight s time would be required for study of the opinions, the seven days time granted by the notice was not adequate and that a proper personal hearing could take place only after the submission of the written explanation. By letter dated 25-5-1988, the opinions of the three doctors, relied on by the Department, were furnished to the appellants. On 4-6-1988, the appellants wrote to the Collector pointing out several irregularities in the proceedings. One of the irregularities pointed out was that while, in terms of the show cause notice, a reply was to be submitted by 26th May, 1988, (7 days from 19-5-1988, the date of receipt of the notice) personal hearing was to take place on the 24th May. This was so despite the fact that expert opinions relied on by the Department were not enclosed to the notice. The opinions relied on by the Department would have to be shown to the experts on whose opinion the appellants relied and their views sought thereon. All this would require 2 to 3 weeks time and the reply to the show cause notice could therefore be submitted by about 27th June, 1988 and a date for hearing should be fixed only thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree doctors on whose opinions the Department was placing reliance. An affidavit from Anil Balkrishna Habbu, Chief Medical Adviser of the appellant company, as also a certificate from the suppliers of Haemodialysers, was also furnished. 12. On adjudication, the Collector of Customs, Air Cargo Complex, Bombay, by order dated 11-8-1988 rejected the appellants contentions and demanded Rs. 24,15,690 towards fine in lieu of confiscation of the goods in terms of the bond executed by them. He held that the reverse osmosis unit was eligible for release as claimed but not the six water treatment plants and one water softening unit. Accordingly, he enforced the terms of the bank guarantees to the extent of the aforesaid amount towards fine and Rs. 43,48,256 towards duty. The bank was directed to deposit the sum forthwith. It is seen from the photocopy of the order that though it was passed on 11-8-1988, it was issued only on 5-9-1988. However, on 17-8-1988, the Assistant Collector had written to the bank stating that the Collector had adjudicated the case and called on the bank to deposit the aforesaid sums forthwith. It was added that a copy of the order passed by the Collector would f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts even higher than those ultimately fixed by the Collector. The Assistant Collector in pressurising the bank to pay up the amount went to the extent of saying that the outcome of the personal hearing before the Collector had nothing to do with the realisation of the bank guarantees! And, this, after a show cause notice had been issued and the matter was pending adjudication by the Collector. The question of calling upon the bank to honour their guarantee and pay the amounts guaranteed by them could have arisen only after the Collector had determined the amounts, if any, payable by the appellants and, the appellants, on being called upon to pay the amounts, refused to pay. The bank was in the role of a surety and the primary responsibility to pay was on the principal, that is, the appellants. All this only goes to show that the Assistant Collector had scant concern or regard for the sanctity of the adjudication process or for its outcome. All he wanted to, and was determined to get was his pound of flesh in a totally misguided zeal for collecting revenue before the competent authority adjudged whether it was, in fact, due or not. The way the date for hearing was fixed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector failing which to pay duty leviable thereon. Another thing to be noted is that the terms accessories and spares have not been defined in the notification. The notification is evidently a piece of beneficient legislation and, in accordance with the Supreme Court judgment in a liberal construction is to be placed on such a legislation. Of course, the construction must not be a strained one. 18. Serial No. 16 of List 2 of Appendix 6 to the ITC Policy 1985-88 reads :- 16. Haemofiltration instrument/Haemodialysers and accessories/spares there of. Having regard to the words used in the customs notification as well as in the ITC Policy, it is clear that if the goods in question are accessories or spares for Haemodialysers they would be so for both purposes. 19. It is also necessary to note at this stage that, by letter, dated 1-7-1988 to the Collector, the appellants, apart from producing an affidavit from Dr. Anil Habbu, their Chief Medical Adviser, stated that the doctor would be produced before the Collector at the time of personal hearing. The record does not show that the doctor was cross-examined on behalf of the Department. The appellants have produced before us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that for further clarification the appellants may contact the C.C.I. E. The name of the experts consulted nor copies of their opinions have been furnished along with the letter. However, in his letter dated 18-4-1988 to the C.C.I. E., the Director General states that the matter had been examined in consultation with experts (again the names of the experts nor their opinions are furnished). This letter further states as follows :- 1. Water Treatment Plant: This is a vague general nomenclature and may not be considered as an essential accessory to Haemodialysers. 2. Reverse Osmosis Machine : This is an important functional component and the same is essential for a functional dialysis unit. 3. Water Softening Unit: Water softeners are physically integrated in some of the haemodialysers machines and so they will form integral part of these machines in such a situation." It may be noted that, according to this letter, some Haemodialyser machines have water softeners physically integrated with them. According to the letter, water softeners would form integral part of the machine in such a situation i.e., when imported physically integrated into a Haemodialyser Machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To this, the suppliers replied on 2-3-1989 clarifying that their spare parts catalogue included only the accessories manufactured by them and since the water treatment plants and water softening units were not manufactured by them, they had not been included in their catalogue. However, they confirmed that the said equipments were manufactured by DWA-Vertriebs-GmbH according to the specifications and designs of Fresenius and were specially intended for use with their haemodialysers. The equipments were designed to ensure water of requisite quality and specifications for use with Dialyser A2008C. The Learned Counsel for the appellants submitted that in view of this clarification from the suppliers, that view taken by the Collector that since the disputed goods were not specified as accessories in the suppliers catalogue, they could not be regarded as accessories, was not sustainable. Reference was also made to a certificate of Dr. Rajapurkar, Medical Director and Consultant Nephrologist, Muljibhai Patel Urological Hospital, Nadiad stating inter alia that the said Hospital had six Haemodialysis Machines and their Reverse Osmosis Plant could produce 250 liters of R.O. water per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments relied on were supplied. Cross-examination of Dr. Varma of the DGHS was not relevant or called for since the DGHS was independent of the adjudicating authority. 28. Shri Roy defended the Collector s order for the reasons set out therein. 29. We have carefully considered the submissions of both sides and perused the record. As stated earlier by us, we are of the view that the expression Haemodialysers, accessories and spares appearing in the relative entry in the Customs Notification (and the corresponding entry in the Open General Licence list) must be construed liberally. In this context, the Supreme Court s judgment in Mehra Bros v. The Joint Commercial Officer, Madras, Judgments Today - JT 1990 (4) S.C. 750 -1991 (51) E.L.T. 173 (SC) is apposite. The entry in the Schedule to the Tamil Nadu General Sales Tax Act of 1959 came up for consideration before the Court. The question for consideration was whether car seat covers were articles adapted to use generally as parts and accessories of motor vehicles, in the context of the Tamil Nadu General Sales Tax Act of 1959. The Court took note of the meaning of the word accessory in Webster Comprehensive Dictionary Internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value criterion could, by itself be determinative of the question whether an article is an accessory to another article. The question has to be determined by its design, the use to which it is put and other relevant factors. In this context, we note that the certificate issued by Dr. Varma of DGHS was apparently not based on his opinion but of certain experts whose identities were not disclosed either to the department or to the appellants. The appellants, armed with the opinion of certain experts, wanted, therefore, to cross-examine Dr. Varma and the Collector also had promised that this question would be considered at the appropriate time. However, the record does not show that the Collector passed any orders on this request or that Dr. Varma was produced for cross-examination. It is also relevant to note that Dr. Habbu, Chief Medical Officer of the appellant-company had also tendered a written report on the goods in question and his presence was offered by the appellants during the hearing but, according to the record, he was apparently not cross-examined by the department. Though the certificates of Dr. Wadia, Dr. Trivedi, Dr. Arun Halankar specifically talked of water sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of requisite quality and specifications for use with the said machines. The evidentiary value of the opinion of the certificate given by Dr. Varma of DGHS is considerably diminished by the fact that it was based on the opinion of unidentified experts and Dr. Varma himself was not, though requested for, made available for cross-examination by the appellants. In fact, reliance on Dr. Varma s opinion, in these circumstances would in itself be sufficient reason to set aside the impugned order. This result would follow by application of the ratio of the Supreme Court judgment in Gupta Tobacco Co. v. Secretary, Government of India, Ministry of Finance, New Delhi AIR 1968 Delhi 64. In that case, the Chemical Examiner had found on test of a representative sample that it contained 73.4% ash and 32.6% tobacco. The request for cross-examination of the Chemical Examiner was denied. The Court observed in its judgment as follows: One of the fundamental rules of natural justice is that the party affected should have full and true disclosure of the facts sought to be used against him. Such disclosure is essential for wise and just application of the authority of administrative agencies. The ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Director General or Asstt. Director General. The appellants had addressed their letter seeking a certificate to the Director General. If the Director (Emergency), and not the Director General, chose to reply, we do not see how this could be held against the appellants. Indeed, we see that the Director (Emergency) s certificate regarding reverse osmosis unit has been accepted by the Collector. 33. The Collector has observed in his order that while the certificate of Dr. Varma of DGHS is clear and unambiguous, the appellants have not been able to furnish definite evidence to show that water treatment plants and water softening unit are essential accessories/parts of Haemodialysers. We have shown how, on the facts and in the circumstances of the case, Dr. Varma s certificate lose its evidentiary value. The appellants, on their part, have placed adequate evidence on record to show that the subject equipments are accessories for Haemodialysers. 34. In the light of the foregoing discussion, we set aside the impugned order and allow the appeal with consequential relief to the appellants. 35. A copy of this order should be endorsed to the Chairman C.B.E.C., for such action as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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