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Judgment
Bharucha, J.—This petition concerns the import of 72 consignments of audio magnetic tapes wound on hubs. Subsequent to their import the petitioners cut the said tapes to the requisite lengths, wound them onto spools and sold them as audio cassettes.
The principal question that arises in the petition is in regard to the particular entry in the Customs tariff under which the said tapes are liable to Customs duty. It was the case of the Customs authorities that they fell within heading 92 01/13 of the Customs Tariff Act and were liable to 100% rate of duty. This entry reads thus:
Musical instrument including electronic and similar musical instruments; sound recorders and reproducers; decoy calls and sound signalling instruments; television image and sound recorders and reproducers, parts and accessories of the above articles."
Mr. Bulchandani, learned Counsel for the respondents, submitted that the said tapes were parts or accessories of the articles mentioned in the heading. He submitted that this entry was nothing but an extract of the Brussels Tariff Nomenclature Item 92.12. All the 13 sub-entries there under were not set out in the Customs tariff, but were incorporated within heading 92.01/13. As the Customs tariff was based upon the BTN, recourse had to be taken to the entries there under. Since the said tapes fell under entry 92.12.04 of the BTN they must be held to fall under heading 92.01/13 of the Customs tariff. ''
The said tapes, or, for that matter, audio tapes upon spools or reels or audio cassettes, are certainly not parts of sound recorders and reproducers. They are also not accessories in that they are additional accompaniments of the recorders and reproducers. They have to be inserted into the recorders and reproducers for them to produce the sound recorded, just as a fountain pen requires the filling of ink to make it function and a car the filling of petrol. Neither ink nor petrol is an accesssory. It is also not correct to say that recourse must be taken to the BTN to construe the Customs tariff. The Customs tariff is based upon the BTN but, as the Introduction to it states, it is formulated "with contraction and expansion as might be necessary in the light of India''s trade pattern, development needs and other factors". Heading 92.01/13 as it read at the relevant time did not cover the said tapes. Heading 92.01/13 was amended thereafter and these words were introduced:) "prepared media for sound or similar recording" to cover audio tapes.
That the said tapes will not be liable to Customs duty if they are not liable to it under heading 92.01/13 is no reason to do violence to the language of that heading as it than stood to read what is not there into it.
But Mr. Bulchandani made a valiant attempt. He contended in the alternative that the said tapes fell within heading 39.07 of the Customs tariff. It prescribes a 100% duty for articles made of the materials described under heading 39.01/06. A great variety are there under mentioned and it is impossible to say offhand that the said tapes fall under this provision. The case regarding heading 39,07 has not been set out at any time. The case has always been restricted to the contention that Customs duty was payable upon the said tapes under Customs tariff heading 92.01/13. J, therefore, decline to send the matter back to the Customs authorities to adjudicate upon whether the said tapes fall under heading 39.01/06, as sought by Mr. Bulchandani.
The third contention raised by Mr. Bulchandani in relation to Customs duty was that the said tapes did not fall within the ambit of Appendix-10, Item-1 of the Import Policy 1981-82, but fell under sub-clause 3 of Item 689 of Appendix 3, in other words, that the said tapes were a banned item which could not have been validly imported under an open general licence. At no stage has the validity of the import been in question. This may truly be said to be an afterthought based upon counsel''s ingenuity.
It is unfortunate that the respondents should not have filed an affidavit in reply to the petition, though 6 years from the date of its admission have elapsed.
The other contentious issue that arises relates to the rate of countervailing duty leviable upon the said tapes. It is contended on behalf of the respondents that the applicable item of the First Schedule of Central Excises and Salt Act, 1944 is item No. 59, Clause 1. It applies to "Articles of a kind used for sound or sound and image recording, whether recorded or not, namely: magnetic tapes of width not exceeding 6.5 millimeters for sound re-cording, whether in spools or in reels". The submission on behalf of the petitioners is that the said tapes were on hubs and not on spools and reels and that, therefore, item 59(1) would have no application. Reference in this be-half is made to the affidavits of five traders which state that tapes on hubs are distinct and different from tapes on spools and reels. It seems to me that this issue cannot be investigated in a writ petition. I, therefore, direct that the Customs authorities do issue a show cause notice to the petitioners in this be-half within four weeks and proceed thereafter as required under law. The petitioners shall furnish a nationalized bank''s guarantee to the Collector of Customs limited to the disputed amount of the CVD which bank guarantee shall be kept alive by them pending the determination of the issue by the Customs authorities and for a fortnight thereafter. In the event that the petitioners fail before the Customs authorities, they shall be liable to pay interest at the rate of 12% p.a. on the amount of the disputed CVD.
Counsel fairly state that the judgment of the Division Bench in the case of Ashok Traders Vs. Union of India and another, covers two other issues raised in this petition, one regarding the loading of landing charges for the purpose of ascertaining the assessable value of the said tapes and the other regarding the loading of Customs duty for the purposes of ascertaining the assessable value of the said tapes for the purposes of CVD. Following the Ashok Trader judgment, these issues must be answered against the petitioners. It must, however, be made clear, having regard to what I have held, that the said tapes will be subject to no Customs duty and that, therefore, there shall be no loading thereof for the purposes of ascertaining their assess- able value for the purposes of CVD. The petitioners shall pay the CVD, calculated after loading the landing charges of the said tapes with interest there- on at the rate of 12% p.a.
The rule is made absolute in the terms aforesaid.
The bank guarantee given by the petitioners at the stage of admission of the petition shall stand discharged upon their furnishing a fresh bank guarantee as aforestated.
No order as to costs.