Shree Bhawani Cotton Mills Ltd. vs The Additional Collector of Customs

Sinha, J.—The Petitioner-Appellant, Shree Bhawani Cotton Mills Ltd., was granted a licence by the Joint Chief Controller of Imports and Exports dated March 3, 1960, authorising it to import certain goods, the material particulars of which are given below:

Country from which consigned :-- U.S.A.

Quantity and description of goods : 3-120 less one Saw Gin Plant, four Cotton Seed Delinting Machines with accessories.

* * *

Approximate value c.i.f. Rupees Six lakhs only, Rs. 6,00,000.

* * *

Limiting factor for purpose of clearance through Customs: Value.

Briefly speaking, it was authorised to import from the United States of America four Cotton Seed Declining Machines with accessories of the approximate value c. i. f. Rs. 6,00,000 only. The goods were to be imported inter alia, from Messrs. Carver Cotton Gin Company, East Bridge Water, Massachusets U.S.A. On the strength of this licence, the Appellant placed an order with the said Messrs. Carver Cotton Gin Company through'' their agents Messrs. Patel Brothers, Bombay. On May 31, 19(50 the Appellant wrote a letter to the American suppliers, a copy of which is annexure ''B'' to the petition and appears at. pp. 14 to )7 of the paper book. The relevant part of that order is set out below:

Re. Our Order for Delinting plant, placed with Messrs. Patel Brothers, Delhi, lated 30.5.60.

With reference to the above as, desired by your representative Messrs. Patel Brothers, Delhi, we give below the full particulars of the equipments that you would ship against our order and request you to confirm the same.

S. No. Quantity Description Price each Total

Four Carver Model P-4-5 Dual Motor 176-Saw Linters. No. Condensers. Duplex Saw Cylinder. Motor Supports and ''V'' Belt Drives for both Motors. Less 2-71/2 HP Motor wiring and controls. 3292.00 131.68.00

One Lint Flue Collecting System for one Line of 6 Linters of 8''x6" Centres, includes hoods at Linters, Piping, Cyclone Collector and Fan less 15 HP Motors and Drive, with separate system and Fan less 5 HP. Motor and Drive to convey the Lint from Collector to Lint Gleaning Machinery. 3346.00 3346.00

One True Line Gummer with 2 HP Built in Motor and drive. 5350.00 5350.00

Two Carver Spare Saw Cylinder complete. 658.00 1316.00

100 doz. True Line Gummer Files 3.25 325.00

1 Lot Spare parts sufficient to/make two. pcs. full and complete. Carver Model P-4-S Dual Motor 170 Saw timers without condensers. Duplex Saw Cylinder, Motor Supports and ''V'' Belt Drives for both Motor Less 2-71/2 HP. Motor wiring and controls and the following items.

It is necessary to observe item 6. Not only does it speak, of "spare parts" but spar parts sufficient to make two full and-complete machines without condensers. On June 10, 1960, Messrs. Carver Cotton Gin Company accepted the order and the goods were imported. The goods were covered by two invoices, copies whereof are contained m annexure ''C'' to the petition, at pp.20, 21, 22 and 23 of the paper book. They show that four machines were being imported with spare parts for the same. On September 13, 1960 the Appellant presented the Bill of Entry through Messrs. Ghatterjee and Company, Clearing Agents and in the Bill of Entry the imported goods were described as "4 Cotton Delinting Machines with accessories and spares". The goods were assessed on the basis of the declaration and were allowed Customs clearance on October 3, 1960. The Customs authorities were, however, not satisfied and certain actions were taken, namely, that on August 19, 1961, the offices of the Appellant in Calcutta were searched by officers of the Calcutta Customs and on August 18, 1961, the offices of Messrs. Patel Brothers of Bombay were searched by officers of the Bombay Customs and certain documents were seized and statements taken. On January 31, 1962, notice to show cause was issued by the Assistant Collector of Customs and Superintendent of Preventive Service, Calcutta and served on the Appellant. A copy of the show-cause notice is annexure ''D'' to the petition and set out at pp. 24 to 26 of the paper book. The charge was that the Appellant had a licence for the input of four delinting machines and they had declared before the Customs authorities that they were importing four such machines, but what they did, in fact, was to import two further machines in excess of the licence, together with their accessories and this was in contravention of Sections 19 and 167(8) of the Sea Customs Act, read with Section 3(1) of the Imports and Exports (Control) Act. The Appellants were asked to show cause why penal action should not be taken against themas "persons concerned" u/s 167(8) of the Sea Customs Act. Together with the show cause notice, about 13 sheets of relevant documents were enclosed. It will be necessary to refer to a letter written by Messrs. Patel Brothers to Messrs. Carver Cotton Gin Company dated June 13, 1960, a letter written by the Appellant to Messrs. Patel Brothers dated February 13, 1961 and a statement made by Sri A.V. Patankar dated September 11, 1961. The first mentioned letter was written by Patel Brothers to their American principals and the relevant part thereof is set out below:

Dear Sirs,

Re. Shri Bhawani Cotton Mills Ltd., Calcutta.

In continuation of our letter of even number dated 7th June, 1960 we are pleased to inform you that the above party have been persuaded by our representative to purchase some more equipment from you and hence they have now decided to increase the letter of Credit in your favour by a sum of $ 2,000/- , thus making a total of $ 34,300/- for the revised order; that increase could be possible as some money has been left over on their import licence.

They will now be purchasing two more 176-Saw Carver Dual Motor Linters and some other equipments; details of the revised order will be intimated to you very'' shortly. As you know they have already placed an order for quantity of four 176-Saw Dual-motor Linters. The additional two machines which they want without condensers should be shipped in completely knocked down condition as spare parts: We are writing this to ascertain from you whether it would be possible for you to send the two Delinters in pieces as requested.

We are confident that you will do the needful in this matter; however, we would like to have your confirmation before the final list is sent to you. In view of the urgency of this case, kindly send your reply by cable and oblige.

Sri Patankar is the Sales Engineer in the firm of Messrs. Patel Brothers, Bombay and he was in service at the relevant time. He was deputed by his employers to give an explanation to the Customs authorities and he, inter alia, said as follows:

In connection with the supply of machinery of M/s. Shri Bhawani Cotton Mills Ltd., Calcutta, it will be seen from the letters which are in possession of Customs at present that the sales representative of M/s. Patel Bros., Delhi, Shri J. S. Dass had been to Calcutta to canvas the order of Shri Bhawani Cotton Mills and therefore was in constant touch with Shri Mohta, a Director of the said Mills. Our firm got a letter from Shri S.K. Das dated 9.6.1960 from Calcutta wherein he has stated that the firm M/s. Shri Bhawani Cotton Mills require two additional delinter machines as spare parts and therefore we should request the suppliers M/s. Carver Cotton Gin Company, U.S.A. to comply with their request. The party therefore placed an order as per their letter of 31.5.1960 to M/s. Carver Cotton Gin Company, U.S.A. copy to our office vide item 6 of the order which is very clear, value U.S.A. 17592.85 and we wrote to M/s. Carver Cotton Gin Company, U.S.A. enclosing of a copy of the orders requesting them to send the Proforma Invoices and show therein as ''Spare Parts'' and not as shown by the party in their order to avoid any complications. This was done on the basis of the letter Shri S.K. Das dated 11.6.1960 from Calcutta wherein he was clearly stated that what we wrote to M/s. Carver. In fact we have acted just as A.P. directed by the man in touch with the Importers.

A letter was written by the Appellants to Messrs. Patel Brothers dated February 13, 1961 which is included in annexure ''D'' to the petition at p. 34 of the paper book and which is as follows:

M/s. Patel Bros.

8, Bagh Dewar,

Delhi-6.

Dear Sirs,

We are pleased to inform you that two Saw Gin Machines and Baling Press have been erected. Six Delinters have also been erected. The Cyclone Machine is under erection.

Although all the machines have been erected, yet we require your Engineer''s help in running these machines particularly the Baling Press which is or a new model and without a pressure Gauge. So, your Engineer''s, presence and guidance for the working of the Press is essential.

We shall therefore be very much thankful to you, if you please send your Engineer at-the earliest.

Thanking you,

Yours faithfully, for Shri Bhawani Cotton Mills Ltd., Sd. Illegible.

On March 5, 1962, the Appellants showed cause. A copy of the same is annexure ''13'' to the petition. It was admitted that the "spare parts" imported were assembled after arrival in India, into two machines.

The defence, in brief, was that the Appellants had not imported two extra machines but they had imported spare parts and although these spare parts were duplicates of practically the entire machine excepting the condenser, it was necessary to import them because of the non-availability of spare parts in this country. Liability u/s 19 or 167(8) of the Sea Customs Act was denied. On April 25, 1962, personal hearing was afforded to the Appellant. At the hearing, one Sri J.K. Tibrewal, an employee of the Appellant company and Sri D. Singbi of Messrs. P.D. Himatsihgka and Company were present. So far as Sri Tibrewal was concerned, he was allowed to represent the Appellant, but the Collector of Customs refused to allow Sri Singhi to represent the Appellant as he had no letter of authority in that behalf, Sri Singhi did not ask for an adjournment or for an opportunity to bring any such letter, but he continued to be present during the entire hearing. Sri Tibrewal was asked to make his submission on behalf of the Appellant but he stated that he had nothing to add to the written explanation which had already been filed. It was on April 30, 1962, when the order of adjudication was made, the Additional Collector of Customs held that there was a deliberate attempt to avoid the relative provisions of law and he imposed a personal penalty upon the Appellants of Rs. 45,000. This order was served on May 5, 1962, upon the Appellant and up to that time no complaint was made about the non-representation of the Appellant, at the hearing. It was on May 14, 1962, for the first time, that a complaint was made that Sri Singhi should have been allowed to be heard at the personal hearing On April 25, 1962. On June 29, 1962, an application was made by the Appellant under Article 226 of the Constitution and a Rule nisi was issued, only limited to grounds (a), (b), (e), (f) and (i) as set out in paragraph 16 of the petition. This rule came up for hearing before Banerjee, J. Before the learned Judge it was firstly contended that Sri Singhi should have been allowed to argue the case on behalf of the company and since he was not allowed to do so, there had been a violation of the principles of natural justice. Secondly, it was contended that what the Appellant had done was to import four machines as well as their accessories. If, under the circumstances, the company imported accessories sufficient to make two extra complete machines, but nevertheless the value thereof was within the limit of Rs. 6,00,000, no violation of the law had been made. These are the only points made before the learned Judge, who rejected the same and held against the Appellant. It is unnecessary to mention another point made in the Court below, namely, that the goods having passed out of the Customs barrier, the Customs authorities could not pursue the goods. This point has not been pursued before us.

It will be observed that the case made by the Appellant in the Court below had, to some extent, departed from the case made by the Appellant before the Additional Collector of Customs. Before the latter, it was contended that the Appellant had imported four machines with "spare parts" and if the spare parts could be erected into two additional machines, nothing wrong had been committed. Mr. Deb, however, argued that what were imported were four machines with "accessories". This change of front is understandable, because the licence permits the importation of four machines with accessories. There is nothing in the licence about spare parts. The difference between "accessories" and "spare parts" is well-known. The word "accessory" has been defined in the Websters dictionary as "As non-essential devise added to a principal body for effectiveness or convenience; as a speedometer in an automobile." Take, for example, an ordinary cycle. A cycle-lamp or a pump would be considered as an accessory, but not as a spare part. A spare part is a part of the machinery which is required from time to time to replace worn out or broken parts; but can, under no circumstances, mean a duplication of the entire machine. Whether the word "accessory" could include a duplicate part was considered in a very interesting case in England, Sir W.G. Armstrong Mitchell and Company, Ltd. v. The Hotchkiss Ordnance Company Ltd. 13 T.L.R. 188. The question there was whether duplicate parts of a gun, like the barrel, could be said to be an "accessory" of the gun, Lord Esher, M.R. held that duplicate parts of a gun were not "accessories" of the gun. Coming to the facts of the instant case, duplicate parts of the machines could not be considered as accessories. Here, what was imported was, in effect, two whole machines, dismantled part by part. The material set out above shows, without any doubt, as to what was intended to be done. The Appellant having a licence to import four machines, actually imported six machines, but tried to get out of the provisions of law in a roundabout fashion.

As regards the first point taken in the Court below, namely, the violation of the rules of natural justice, we agree with the finding of Benerjee J. that the point has not been substantiated. A collector of Customs hearing the matter under the Sea Customs Act is not a full-fledged court. It is an administrative tribunal of a quasi-judicial nature. There is no law or rules which make it imperative for such a tribunal to allow parties to be represented by lawyers. The Collector of Customs, however, wisely allows the representation of parties through lawyers. It is however, common caution to require a lawyer appearing for a party to produce his authority. Whether under such circumstances, a formal vokalat-nama is permissible or could be filed, need not be considered. There must, at least, be some kind of written authority which must be shown to the presiding officer of the tribunal, before a lawyer can claim to represent a party at a personal hearing. Sri Singhi had no such authority. It is pointed out that on the record there was nothing to show that he represented the Appellant. Sri Singhi did not offer to bring a letter of authority nor did he ask for an adjournment for the purpose. Indeed, no objection in this behalf was taken before the Additional Collector of Customs until May 14, 1962 when the order had already been made and served. So far as the rules of natural justice are concerned it has been held that a quasi-judicial tribunal of an administrative nature should follow the rules of natural justice which is no more than affording a party, against whom there is a charge, an adequate opportunity to defend himself. If any document or evidence is to be used against him, it should either be adduced in his presence or he should be given a copy thereof so that he may have an opportunity of meeting it. That is the most that is required of such a tribunal. See Gullapalli Nageswara Rao and Others Vs. Andhra Pradesh State Road Transport Corporation and Another, , State of Mysore Vs. S.S. Makapur, . In this particular case all the necessary documents were enclosed with the show cause notice and the Appellant had every opportunity to deal with them. Before us a point was made that Patel Brothers were not the agents of the Appellant but agents of the American suppliers and as such, any letter written by them or any statement made by their employee was not binding on the Appellant. This is a point that was not taken in the Court below. However, there is nothing of substance in this point. As I have mentioned above, the tribunal is not a court in the strict sense of the term and the Evidence Act does not apply. What is to be seen is that the rules of natural justice are followed. As long as these rules are followed, the tribunal can use such materials as are available to it and in the present instance, was entitled to rely on the letters written by Patel Brothers to their Principals in America, as well as the statement made by one of their employees, In fact, we need not consider it as an admission at all. They are evidence of facts and show the true facts as they have occurred in the case. Apart from anything else, we have to consider the conduct of the Appellant itself, who not only imported two complete machines in a dismantled condition but directly they arrived, they assembled them together into two complete machines and enquired of Patel Brothers for the means of working them satisfactorily.

As regards the second point, I have already mentioned that the licence did not entitle the Appellants to import anything beyond four machines and their accessories. Item 6 of their letter to the suppliers dated May 31, 1960, clearly shows the nature of the spare parts which were imported and which were stated ''in the Court below to be accessories. They are not accessories nor are they spare parts. They are two extra machines which were imported in a dismantled condition in order to avoid the law. It was faintly argued before us that at least the condenser was not imported. There is no evidence anywhere to show that the condenser was an essential part of the machine or that it could not be locally made as was the case in a Bombay decision, which I will presently mention. It will also be noted that in the four original machines which were imported, there were also condensers.

Banerjee, J, has referred to a decision of mine in which the facts were somewhat similar--Knitting Machineries Syndicate (India) Private Ltd. v. The Collector of Customs Matter No. 198 of 1960, judgment dated July 28, 1961. In that case the facts were as follows: Under the Sea Customs Act, read with the Imports and Exports (Control) Act, the importation into India of complete knitting machines and component parts thereof were restricted. So far as complete machines were concerned, the importation was totally prohibited. In the case of actual users, however, importation of component parts was allowed under a licence. The Petitioner in that case, Knitting Machineries Syndicate (India) Private Ltd. Matter No. 198 of 1960, judgment dated July 28, 1961 took out a licence for the importation of component parts. In that guise, they brought into India a number of complete machines but in a dismantled state. It was argued that no violation of the law had been made because the prohibition was as to the import of complete machines and not in respect of parts which could be assembled into complete machines. I disallowed this contention and held that this was a dishonest way of getting round the law and could not be permitted. This view has now been endorsed by the Supreme Court in Girdharilal Bansidhar Vs. Union of India (UOI), . The facts, in that case were as follows: Under the Sea Customs Act, the importation into India of "Jackson type oval plate single bolt belt fasteners" was prohibited by the relevant Government Notification, The Appellant was granted a licence to import nuts and bolts. It imported certain goods describing them as "Stove Bolts and Nuts", but it was found that they were parts of the item which was prohibited. The prohibited item consisted of certain bolts, nuts and washers. It was found that the Petitioner had tried in a most ingenious way to avoid the law. One of their relations imported the washers and they imported the remaining parts. The Customs authorities objected and asked the Petitioners to show cause and the defence taken was that after all these were component parts. Ayyangar, J. said as follows:

It appears to us that it does not stand to reason that a component part which has no use other than as a component of an article whose importation is prohibited is not included in a ban or restriction as regards the importation of that article. Expressed in other terms, we cannot accede to the position that it is the intention of the rule that importers are permitted to do indirectly what they are forbidden to do directly and that it permits the importation separately of components which have no use other than as components of an article whose importation is prohibited and that an importer is thereby enabled to assemble them here as a complete article though if they were assembled beyond the Customs Frontiers the importation of the assembled article into India is prohibited.

The Supreme Court upheld the conviction. Before the Supreme Court an un-reported judgment of Mr. Justice Mudholkar of the Bombay High Court was cited--D.P. Anand v. T.M. Thakore and Company Appeal No. 4 of 1959, Bombay High Court. In that case, however it was admitted that the articles imported were components of a motor cycle, but when assembled, they would not form a complete motor cycle which was the article whose importation was restricted. It would still lack certain essential parts which were admittedly not available in India and could not be imported.

Therefore, the law on the point is quite clear. The importation of the machines in question are prohibited without a licence. The licence allows the importation of four machines with accessories. Importation of two complete machines, calling them spare parts, cannot be said to be the importation of accessories of the four machines which were permitted to be imported. In this case also, the Appellants were dishonestly trying to do something by a ruse, or in the words of the Supreme Court, tried to do something indirectly which they could not do directly. This cannot be permitted in law. The result is that the finding of the Court below is correct and we see no reason to interfere with the judgment.

The appeal is accordingly dismissed with costs. Certified for two counsel.

Masud, J.

I agree.