Holding

Under s.14(1) the value of imported goods is deemed to be the price at which like goods are ordinarily sold at the place of importation, and the Collector was justified in using the quotation prices; the imported SKD/CKD items were fully assembled copiers not covered by the licence, so the confiscation and penalties stand.

Summary

Sharp Business Machines Pvt. Ltd., a small‑scale copier manufacturer, imported copiers in SKD/CKD form and declared a total value of Rs 99,612. The Collector of Customs, relying on quotations submitted with the licence application, valued the goods at Rs 7,15,485, held that the company had misdeclared the value and the nature of the goods, and ordered confiscation of the entire consignment with fines. The Customs, Excise and Gold (Control) Tribunal dismissed the company's appeals. The company appealed to the Supreme Court under s.130(e) of the Customs Act, arguing that the invoice values should be accepted and that the SKD/CKD parts were permissible under the licence. The Court held that under s.14(1) the value is deemed to be the price at which like goods are ordinarily sold at the place of importation, and the Collector was justified in using the quotation prices. It also held that the imported items were fully assembled copiers, not merely components, and thus fell outside the licence and violated the import policy. Consequently, the Court dismissed the appeals, upholding the confiscation and penalties.

Issues considered

The correct method of valuation of imported goods under s.14(1) of the Customs Act – whether the Collector could rely on quotation prices rather than invoice values.
Whether the SKD/CKD consignments constituted fully assembled copiers and were covered by the licence.
Whether the Collector’s order of confiscation and imposition of fines and personal penalties was lawful.

Legislation cited

Customs Act, 1962s. 11(l)(d), s. 11(l)(m), s. 124, s. 130(e), s. 14(1)
Customs Tariff Act, 1975
Imports (Control) Order, 1955
Sea Customs Acts. 167(8)

Subjects

Customs valuationSection 14(1)misdeclarationSKD/CKDimport licenceconfiscationpenaltyimport policysmall scale industry

Judgment

SHARP BUSINESS MACHINES PVT. LTD .• BANGALORE
A
v.
COLLECTOR OF CUSTOMS, BANGALORE

AUGUST 24. 1990

B [N.M. KASLIWAL AND S.C. AGRAWAL, JJ.]

Customs Act, 1962: Ss. 14(1), lll(d}, 111(m), 112& 130(e)-
lmport of copiers in SKD/CKD form-Confiscation of for misdescrip-
tion and misdeclaration of value-Va/idit_v of-Personal penalties-
] ustification for.
c Section 14(1) of the Customs Act, 1962 provides that where a duty
of customs is chargeable on any goods by reference to their value, the
',
value of such goods shall be deemed to be the price at which such or like
goods are ordinarily ~old or offered for sale, for delivery at the time and
place of importation, in the course of international trade.
D
The appellant-company, a small scale manufacturer of plain
paper copiers, had submitted, alongwith their application for approval
of the phased manufacturing programme, the quotations received by
them from their foreign collaborators based in Hongkong in respect of
the various components and obtained a licence in this regard for
E Rs.4,94.500. Subsequently, they imported three consignments of com-
ponents and consumables in SKD/CKD form from suppliers at Hong-
kong and another consignment from Singapore. The total value
dedared under the four bills of entry was Rs.99,612.

The Collector of Customs found that the invoices submitted by the
F company were undervalued and determined the price of goods at
Rs.7,15,485 with reference to the quotations, for the purposes of
s. 14(1) of the Act. He thus held that there was a misdeclaration of value
to the tune of Rs.6,15,873, that the duty payable thereon would be
Rs.10,96,228.20 and that the entire goods were liable to confiscation
under s. ]] l(m) of the Act. He also held that the goods imported were
G fully finished copiers in SKD/CKD form and as such there was a
misdeclaration that the imported goods were only parts of the copiers, '
that description of most of the items in the invoices had been deli-
berately manipulated to suit the description in the licence, that folly
assembled copiers were not permissible to be imported and this was a
clear violation of the Act and the terms of the licence. In the alternative
H he held that even if all the parts contained in SKD/CKD packs were y •
28
1- S.B. MACHINES v. COLLECTOR OF CUSTOMS 29

viewed individually, none of the items was covered by the licence. He
further held that the value of the parts imported for the purposes of A
s. 14(1) of the Act would be Rs.5,63,332, whereas the importers were
permitted to import goods worth Rs.4,94,500, that there was thus an
..,. excess of Rs.68,832 and as such the goods were liable to confiscation
under s. 11 l(d) of the Act. Consequently, he directed confiscation of the
!!j entire goods with an option to the company to pay Rs.3 lakhs in lieu B
thereof and also Rs.2 lakhs in personal penalties. The Customs, Excise
.. ) and Gold (Control) Appellate Tribunal dismissed their appeals.

~ In these appeals under section 130(e) of the Act, it was contended
for the appellants that the quotations had .indicated prices at Hongkong
m( and .not the place of importation, that at the time of submitting the
application for grant of licence the prices were quoted for fixing the c
upper limit of the value of the licence, that when the actual purchase
transactions were entered into the company negotiated for the price and
having regard to the quantum of purchase and the prospects of future
sales the company was given 25 per cent discount by the suppliers, and
that in the absence of any other material on record the invoice price D
alone could form the basis of valuation of the imported goods. For the
respondents, it was contended that the prices quoted by the collabora-
tors were based on the prices given by the manufacturers, and there was
no question of supplying the components on a lesser price than given by
the manufacturers themselves, that the goods imported were not com-
ponents of plain paper copiers as declared, that the cartons in fact E
comprised of all the parts required for full and complete assembly of 14
copiers, that the company in importing them in the guise of separate
components and accessories had not only violated the terms and condi-
lions of the licence but also committed a complete fraud, that in the
circumstances the adjudicating authority was fully justified in placing
\
reliance on the prices mentioned in the quotations. F

Dismissing the appeals under s. 130(e) of the Act, the Court,

HELD: I.I According to S. 14(1) of the Customs Act, 1962 for
•. purposes of assessment the value of the imported goods is to be deemed
to be the price at which such or like goods are ordinarily sold, or offered G
for sale, for delivery at the time and place of importation, in the course
of international trade, where the seller and the buyer have no interest in
the business of each other and the price is the sole consideration for the
sale or offer for sale. [36G-H)

1.2 In the instant case the appellant-company itself had produced H
30 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.

a copy of the quotations received by them from their collaborators at
A
Hongkong in respect of the copiers and other items imported, alongwith
their application for approval of their phased manufacturing pro-
gramme. They, therefore, could not dispute the correctness of the
prices mentioned in the said quotations. Not only that, they have also
failed to produce any other material on record to show that the value
B mentioned in the invoices was the correct market value of the goods
imported at the' relevant time. The adjudicating authority in these
circumstances was perfectly justified in taking the prices mentioned in
•
the quotations as a basis for determining the correct value of the
imported goods. [37 A-Cl

2. J The goods covered by the three bills of entry dated 3rd
c February, 1987 had been shipped from Hongkong on the same day i.e.
on 21st January, 1987. The entire goods had arrived on the same day
and by the same flight on 30th January, 1987. These goods had been
supplied by the same supplier. They comprised of ten numbers copiers
in SKD/CKD condition, accessories, spares, consumables and excess
D items. The goods covered by the 4th bill of entry were four numbers
copiers in SKD/CKD condition and consumables. If assembled
together these would constitute full and complete copiers. The licence '
produced was valid for certain components and was not valid for fully
assembled copiers. The appellant-company was thus doing indirectly
what they were not permitted to do directly under the licence. [37H; 38A-B]
E
Girdhari Lal Bansi Dhar v. Union of India, [1964] 7 SCR•62.
referred to.

Union of India v. Tarachand Gupta & Bros., AIR 1971SC1558.
distinguished.
F
2.2 The intention and purpose of the import policy was to give
incentive and encouragement to the new entrepreneurs establishing
small scale industries and in the first phase to import 62% of the com-
ponents of the copiers and the balance of 38% was to be manufactured
by them indigenously. This percentage of 62% was to be reduced in the
G subsequent years. The import policy was not meant for such entre-
preneurs .who instead of importing 62% of the components, imported
I 00% of the components of a fully finished and complete goods
manufactured by a foreign country. Fully finished plain paper copiers
were the end product of the importers and hence could not be imported
by them. The device a•lopted by the company in the instant case was
H ti)us a complete fraud on the import policy itself. [37D-F]
S.B. MACHINES v. COLLECTOR OF CUSTOMS [KASLIWAL, J.] 31

2.3 The order confiscating the goods and imposing fine was,
A
therefore, rightly made, [43A]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
~·
2403-05 of 1989

From Orders Nos. 568 to 570/88-A dated 31.10.1988 of the B
Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in
Appeal No. C/A. No. 808 to 810 of 1987-A and C/Misc. No. 390 of
,
.
1987-A .
).

S.K. Dholakia and S.K. Kulkarni for the Appellant.

Kapil Sibal, Additional Solicitor General, P. Parmeswaran and
c
Mrs. R. Rangaswamy for the Respondent.

The Judgment of the Court was delivered by

KASLIWAL, J. All these appeals under Sec. 130(e) of the 0
Customs Act, 1962 (hereinafter referred to as the Act) are directed
against the common order made by the Customs, Excise and Gold
(Control) Appellate Tribunal, New Delhi dated 31.10.88 in C.A. Nos.
808 to 810/87-A.

Brief facts of the case are that M/s. Sharp Business Machines E
(Pvt.) Ltd., Bangalore (hereinafter referred to as the company) is a
small scale manufacturing unit duly registered as such since 1984. The
company had started the phased manufacture of plain paper copiers
and obtained a licence in this regard dated 25.11.86 for Rs.4,94,500
from the licensing authority. The company imported components and
consumables in SKD/CKD for plain paper copiers. Three consign- F
ments were imported from M/s. Paralax Industrial Corp., Hongkong
under airways bill numbers 098, 4960, 3120; 098, 4960, 3116; and 098,
4960, 3105 all dated 21. 1.87. The goods were received at the air cargo
complex, Bangalore. The company sought the clearance of the im-
ported goods under bills of entry Nos. 2044, 2045 and 2046 all dated
3.2.87. Similarly, the goods were also imported from M/s. Alpha G
Papyrus Trading Co. Pvt. Ltd., Singapore under airway bill No. 098
4925 4914 dated 19.2.87. the clearance for this consignment was sought
under bill of entry No. 4993 dated 11.3.87. The company had declared
the value of each of the consignments at Rs.32.182 Rs.43,359,
Rs.5 .412 and Rs. 18,659 respectively in respect of the abovementioncJ
bills of entry Nos. 2044, 2045, 2046 and 4993. The total value declared It
was Rs.99,612 under all the four bills.
32 SUPREME COURT REPORTS (1990] Supp. 1 S.C.R.

Proceedings were held before the Appraiser of Customs air
A cargo complex Bangalore for verification of the goods and their valua-
tion etc. and the statements of the company's Managing Director Sh.
Sadanand were also recorded on 11.2.87. 10.3.87 and 18.3.87 under
Sec. 108 of the Act. The Collector of Customs issued a notice to the
company under Sec. 124 of the Act on 4.3.87 relating to the first
B consignment. In the said notice it was stated that 4 items were not
covered by the licence and the same were liable for confiscation. How-
ever, on 30.3.87 the Collector issued another notice in supersession of
the earlier notice dated 4.3.87. Notice was also issued on the same date
in respect of bill of entry dated 11.3.87. By the said notices the Col-
lector proposed to enhance the value of the goods imported and
further proposed to confiscate the entire goods imported and also to
c levy a fine and other penalties. The company was accused of misdes-
cription of the goods, misdeclaration of value, suppression of the rela-
tionship with the suppliers, suppression of the place of origin of goods
etc.

o The Collector by his order dated 13.4.87 decided all the j)oints
against the company. The Collector held that the quotations given by •
Mis. Shun Hing Technology Ltd. alongwith the application for
approval of their PMP during July 1986 should be taken as the correc.t
value of the go.ads imported. and the plea of the company that it had
received a special discount in view of the bulk purchases and promise
E of future purchases was not accepted. The Collector in these circum-
stances determined the price of the goods at Rs. 7, 15,485 for the
purposes of Sec. 14(1) of the Act. The Collector thus held that there
was a misdeclaration of the value to the tune of Rs.6, 15,873 .and the
duty payable thereon would be Rs.10.96,228.ZOp. The Collector
further held that the entire goods imported were liable to confiscation
F under Sec. 11 l(m) of the Act. The Collector also held that the goods
imported were fully finished copiers in SKD/CKD form and as such
there was a misdeclaration that the imported goods were only parts of
the copiers. The Collector also held that description of most of the
items in the invoices had been deliberately manipulated to suit the
description in the licence. The goods covered by three bills 2044, 2045
G and 2046 were held to be one consignment and one A WB and thus
viewed as one consignment, it amounted to the import of ten copiers.
The goods imported under the 4th bill No. 4993 were four fully
finished copiers in SKD/CKD form. The Collector further held that in
terms of note (i} to Imports Control Order, 1955 and Customs Tarrif
Act, 1975, these goods will be deemed to be fully assembled copiers
H for the purpose of valuation and licence. Thus the goods imported as
S.B. MACHINES v. COLLECTOR OF CUSTOMS {KASUWAL. J.J 33

fully assembled copiers were not pumissible to be imported and this
A
was a clear violation of the Act and the terms of the licence. It was also
held in the alternative that even if all the parts imported were viewed
individually, none of the items tally with the licence. The Collector in
this regard gave detailed reasons for arriving at this conclusion. The
Collector also held that the value of the parts imported for the
purposes of Sec. 14(1) of the Act would be Rs.5,63,332 whereas the B
importers were permitted to import goods worth Rs.4,94,500. There
was thus an excess of Rs.68,832 and as such the goods were liable to
)
confiscation under Sec. 11 l(d) of the Act. The Collector in these
circumstances passed an order for confiscation of the entire goods with
an option to the company to redeem them on payment of a fine of Rs.3
lacs. The Collector also imposed a fine of Rs.1 lac on the company and
Rs. 1 lac on Sh. Sadanand the Managing Director of the Company. c
The company filed two appeals aggrieved against the common
order of the Collector relating to both the notices and a separa1e third
appeal was preferred by the Managing Director before the Customs,
fa.cise and Gold (Control) Appellate Tribunal. The Tribunal dismis- D
sed all the three appeals by a common order dated 31.10.88. The
company and the Managing Director aggrieved against the order of the
Tribunal have filed the abovementioned three appeals befe>re this
Court.

One of the arguments raised before the Tribunal was that the E
Collector erred in treating SKD/CKD parts of the copiers imported, as
assembled copiers, for the purpose of Schedule I to the Imports (Con-
trol) Order, 1955 and the case Union of India v. Tarachand Gupta &
Bros., AIR 1971 SC 1558 applied on all force to the instant case. The
\ Tribunal in this regard set aside the finding recorded by the Collector
and placing reliance on a decision of the Calcutta High Court in Col- F
lector of Customs, Calcutta v. Misuny Electronic Works, [1987] 30
EL T, 345 held that one has to look into the respective licence and not
to the fact that if all the consignments covered by all the bills of entry
are assembled together, there will be complete machines. The Tri-
bunal, however, upheld the other findings recorded by the Collector to
the effect that even if all the imported parts contained in SKD/CKD G
packs of copiers were viewed individually the licence produced was not
valid for any of the items imported. The Tribunal thus held that the
Collector was right in holding that the imported goods were not
covered by the valid licence. The Tribunal also held that the Collector
was right in rejecting the price shown by the company in the invoices.
The lribunal also rejected the contention made by the counsel for the H
34 SUPREME COURT REPORTS [ 1990] Supp. l S.C.R.

A company that the valuation made by the Collector was exhorbitant. As
regards the question of imposing fine and penalty also the Tribunal
found the order of the Collector as correct. and did not find any cogent
reason to interfere in the order of the Collector.

We have heard Mr. Dholakia for the appellants and Mr. Kapil
B
Sibbal learned Addi. Solicitor General for the respondents.

It was argued by Mr. IJholakia that the Tribunal committed a
serious error in holding that the invoices submitted by the company
were undervalued and could not be relied upon for determining the
correct value of the goods imported. It was contended that the
c Collector Customs was not correct in determining the value of the
imported goods on the basis of the quotations of M/s. Shun Hing Tech-
nology Ltd., Hongkong. The quotation of Shun Hing indicated prices at
Hongkong and not the place of importation. There was no other mate-
rial on record to determine the value of the imported goods. It was
thus contended that in the absence of any other relevant material, the
D
invoice price has to be taken as the basis for valuation. It was also
submitted that there was no justification in discarding the price shown
in the invoices which contained the correct value of the goods
imported and in case of Customs authorities were not placing reliance
on such prices mentioned in the invoices. then the burden lay on the
Customs department to find out the correct value of the goods by
E collecting material and other adequate evidence before enhancing the
value of the imported goods. The onus to prove the charge of under-
valuation against the company was on the Customs department and
the evidence relied upon by them, as contained in the adjudication
order. is not at all sufficient to discharge that onus. It was further
argued that any reliance placed on the quotations furnished at the time
F of submitting the application for grant of licence was wholly erroneous.
At the ti Ille of submitting the application for grant of licence the prices
are quoted for fixing the upper limit of the value of the licence. When
the actual purchase transactions were entered into, the company
negotiated for the price and having regard to the quantum of purchase t
and the prospects of future sales, the company was given 25% r ;count
G by the suppliers. It was also submitted that the prices quoted by M/s.
Shun Hing Technology Ltd., Hongkong were not the value of the
components imported by the company in SKD/CKD form of plain
paper copiers. Thus any price quoted by M/s. Shun Hing c2c never
form any basis for arriving at a proper and correct valuation of the
goods imported by the company in the present case.
H
S.B. MACHINES v. COLLECTOR OF CUSTOMS [KASLIWAL, J.] 35
'r "
On the other hand it was submitted by the learned Addi.
Solicitor General that it has been admitted by Sh. P.N. Sadanand, A
Managing Director of the company in his statement dated 10.3.87 that
the goods imported in the present case by the company were of
Japanese origin and manufactured by M/s. Matushita Electric Com-
parry Ltd., Japan. M/s. Shun Hing Technology Ltd., Hongkong were
the authorised agents of M/s. Matushita Electric Co. Ltd., Japan, who B
are the manufacturers of Panasonic copies. He further adm-itted that
normally the Panasonic copies were supplied to Hongkong in fully
assembled form and then they were dismantled in Hongkong by the
) agents and thus supplied in India in SKD/CKD form. Sh. Sadanand
admitted to have visited Hongkong during January, 1987 alongwith his
Engineer Sh. K.S. Radhakrishan for purchase of 10 copiers-6 Nos.
Model EP 1300 and 4Nos. Model EP 2625 and that he alongwith the c
EngineeT dismantled the fully assembled copiers. It was submitted that
the goods contained in the cartons comprised of all the parts required
for full and complete assembly of copiers. At the time of examination
of the goods covered by Bill of Entry No. 4993 dated 11.3.87, it was
found that out of the six cartons, four cartons were the original cartons D
used for packing fully finished/assembled copiers Model EP 2625. The
description, model number, brand, manufacturer and country of
origin/manufacture of the copier (viz. Plain Paper Copier EP 2625
Panasoni, Matushita Electric Co. Ltd. and Japan respectively) were
clearly marked on these four cartons, one set of cassettes, trays,
covers, one drum, one developer unit and a bottle of developer. It was E
thus argued that the original packing cartons used for packing fully
finished copiers are normally supplied only if fully finished copiers are
purchased. It was submitted that the adjudicating authority has given
detailed reasons for showing that the goods imported were not com-
ponents of plain paper copiers as declared. In fact, the company had
\
' purchased 14 fully finished copiers 10 in Hongkong and 4 in Singapore F
and had then dismantled for importing the same in the guise of compo-
nents of copiers. The company had submitted application for approval
of their phased manufacturing programme to the Development Com-
missioner, Small Scale Industries Govt. of India, New Delhi in July,
1986 and alongwith this application they had also submitted the quota-
lions received by them from M/s. Shun Hing Technology Ltd., Hong- G1
kong which covered all the items imported except a few items like
toner, drum and table for model FP 2625. The company in the present
case not only violated the terms and conditions of licence but also
committed a complete fraud in importing fully finished copiers which .
-,. was a totally prohibited item, in the guise of separate components and
accessories by dismantling the fully finished copiers. In the above H
36 SUPREME COURT REPORTS (1990] Supp. l S.C.R.

circumstances the adjudicating authority was fully justified in not
A
believing the value mentioned in the invoices .and in placing reljan.ce
on the pric.es melltio11ed in the quotations givep b¥ fyl/s. ~nun Hi11,g
Technology Ltd., Hongkong. It was further argued by Mr. Sib!)al that
the prices quoted by M/s. Shun Hing were based on the prices given by
the manufacturers i.e. Mis. Matushita Electric Co. Ltd., Japan .and
B there was 110 question of supplying the compqnents of the copiers on a
lbser price than given by the manufacturers themselves. The company
had a special relationship with M/s. Shun Hing Technology Ltd.,
Hongkong as a sort of collaborator with no formal agreement and t.hat
M/s. Paralax Industrial Corp., Hongkong were in turn agents of M/s.
Shun Hing Technology Ltd., Hongkong.

c We have considered the submissions made by learned counsel for
the parties. Section 14 of the Act provides for valuation of goods for
the purpose of assessment. Section 14(1) which is relevant for our
purposes reads as under:

D 14. "Valuation of goods for purposes of assessment:

(I) For the purposes of the Customs Tariff Act, 1975 (51 of
1975), or any other law for the time being in force whereun-
cler a duty of customs is chargeable on any goods by refer-
ence to their value, the value of such goods shall be deemed
E to be the price at which such .or like goods are ordinarily
sold, or offered for sale, for delivery at the time and place
of importation or exp.ortation, as the case may be, in the
course of i11ternational trade, wijere the seller and the
buyer !)ave no interest in the busil)ess of each o.tl)er apd the
price is the sole consideration for the sale or offer for sale:
F
Provided that such price shall be calculated with reference
to the rate of exchange as in force on the date on which a
bill of entry is presented under Section 46, or a shipping bill
or bill of export, as the case may be, is presented under
Section 50."
G
According to the above provision the value of the goods shall be
deemed to be the price at which such or like goods are ordinarily sold,
or offered for sale, for delivery at the time and place of importation, in
the cours,e of internation.al trade where the seller and the buyer h.ave
no juterf'St in the business of each other and the pric!' is the .sole
tt consider,ation for t'1e s.ale or offer for sale. In the pre5ept case the
S.B. MACHINES v. COLLECTOR OF CUSTOMS !KASLIWAL, J.] 37

company itself had produced a copy of the quotations received by
them from M/s. Shun Hing Technology Ltd., Hongkong in respect of A
the copiers and other items imported alongwith their application for
approval of their phased manufacturing programme. The company
itself having produced these quotations, they cannot dispute the cor-
rectness of the prices mentioned therein. The company has not only
not disputed the correctness of these quotations but has not produced B
any other material on record to show that the value mentioned in the
invoices was the correct market value of the goods imported at the
relevant time. The adjudicating authority in these circumstances was
) perfectly justified in taking the prices mentioned in the quotations as a
basis for determining the correct value of the imported goods.

Mr. Dholakia next contended that the Tribunal itself had set c
aside the finding of the adjudicating authority on the question of treat-
ing SKD/CKD packs of the copiers imported comprised of all the
100% components of copiers. The company had tried to practice a
fraud in defeating the import policy itself. The intention and purpose
of the import policy was to give incentive and encouragement to the D
new entrepreneurs establishing small scale industries and in the first
phase to import 62% of the components of the copiers and the balance
of 38% was to be manufactured by them indigenously. According to
the import policy this percentage of 62% was to be reduced in the
subsequent years. The import policy was not meant for such entre-
of
preneurs who instead importing 62% of the components, imported E
100% of the components of a fully finished and complete goods
manufactured by a foreign country. It is an admitted position that fully
finished plain paper copiers were a prohibited item for import and thus
the device adopted by the company in the present case was a complete
fraud on the import policy itself. Apart from the above circumstances in
our view the Tribunal was not right in setting aside the finding of the f
adjudicating authority and in taking the view that one has to look into
the respective licence and not to the fact that if all the consignments

l
covered by all the bills of entry assembled together, there will be a full
and complete machinery.

It is an admitted position that goods covered by the three bills of G
entry Nos. 2044, 2045 and 2046 wer; all dated 3.2.87 and had been
shipped from Hongkong on the same day i.e. on 21.1.87. The efl(ire
goods had arrived on the same day and by the same flight on 30th
January, 1987. The goods covered under the three bills of entry have.
'° been supplied by the same supplier viz. M/s. Paralax Industrial Corp.,
Hongkong. Tbe goods covered by these bills of entry are ten numbers Ji
38 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.

copiers in SKD/CKD condition, accessories, spares, consumables and.
A excess items. The goods covered by the 4th bill of entry are four
numbers copiers in SKD/CKD condition and consumables. the
licence produced is valid for certain components and is not valid for
fully assembled copiers. The fully assembled copiers are the end pro-
ducts _of the importers and hence cannot be imported by them. Plain
B Paper Copiers are electronic equipments.

The case Union of India v. Tara Chand Gupta & Bros. (supra)
lends no assistance to the appellants in the facts and circumstances of
the present case. In the above case Tara Chand & Bros. held an import
licence dated July 10, 1956 permitting them to import parts and acces-
sories of motorcycles and scooters as per Appendix XXVI of the
c Import Policy Book for July-December, 1956. Under the said licence,
the respondents in that case imported certain goods which arrived in
two consignments, each containing 17 cases by two different ships.
According to the respondents, the goods so imported by them were
motorcycle parts which their licence authorised them to import. The
D Customs authorities, on the contrary held, on the examination of the
goods, that they constituted 51 sets of "Rixe Mopeds complete in a
knocked down condition". After holding an inquiry the Deputy Col-
lector directed confiscation of the said goods with an option to the
respondents to pay certain sums in lieu of confiscation and also
personal penalties. That order was passed on the basis that the goods
E imported were not parts and accessories of motorcycles and scooters
presumably under entry 295 of the Schedule to the Import (Control)
Order but were motorcycles/scooters in completely knocked down
conditions, prohibited under remark II against entry 294, a licence in
respect of goods covered by it would authorise import of motorcycles
and scooters. The Deputy Collector held that though the goods were
F not in completely knocked down condition it made no difference as the
tyres, tubes and saddles were easily obtainable in India and their
absence did not prevent the machines being otherwise complete. He
also found, that there was a trade practice under which traders were
supplying motorcycles without tyres, tubes and saddles unless the f•
purchaser specially asked for these parts. According to him the goods
G could not be regarded as spare parts but were "Moped in disassembled
condition." The respondents in the above case filed a civil suit and the_
matter went in appeal to the High Court. The Letters Patent Bench of
the High Court held that the Collector's jurisdiction was limited to
ascertain whether or not the goods imported by the respondents were
spare parts and accessories covered by entry 295 in respect of which
H they undoubtedly held the licence, and therefore, he could not have
'(
S.B. MACHINES v. COLLECTOR OF CUSTOMS [KASLIWAL. J.] 39

lumped together the two consignments which, though imported under
A
one licence, arrived separately and were received on different dates
and could not have come to the conclusion that the plaintiffs had
imported 51 "Rixe" Mopeds in completely knocked down condition.
The respondents were entitled to import the said goods and therefore,
Section 167(8) of the Sea Customs Act did not apply and the respon-
dents consequently could not have been held guilty .of breach either of B
that Section or Section 3 of the Imports & Exports (Control) Act. It
was further held that the decision of this Court in GirdhariLa/ Bansi
Dhar v. Union of India, [1964) 7 SCR 62 did not over rule but only
distinguished judgment in D.P. Anand v. M/s. T.M, Thakore & Co.,
C.A. No. 4/1959 decided on August 17, 1960 (H.C.) and therefore, the
binding force of that decision remained unshaken. The Union of India
came in appeal to this Court by grant of certificate. This Court held as c
under:

"Under entry 295, except for rubber tyres and tubes for
whose import a separate licence could be obtained under
entry 41 of Part V, there are no limitations as to the D
number or kind of parts or accessories which can be
imported under a licence obtained in respect of the goods
covered thereunder. Prime facie, an importer could import
all the parts and accessories of motor cycles and scooters
and it would not be a ground to say that he has committed
breach of entry 295 or the licence in respect of the goods E
described therein, that the parts and accessories imported~
. -
if
assembled, would make motor cycles and scooters in CKD
condition. There are no remarks against entry 295, as there
are against entry 294, that a licence in respect of goods
covered by entry 295 would not be valid for import of
spares and accessories which, if assembled, would make F
motor cycles and scooters in CKD condition. Apart from
that, the goods in question did not admittedly contain tyr"s,

l tubes and saddles, so that it was impossible to say that they
constituted motor cycles and scooters in CKD condition.
The first two could not be imported and were in fact not
imported because that could not be done under the licence, G
in respect of goods covered by entry 295 which expressly
prohibited their import and a separate licence under entry
41 of Part V would be necessary. The third, namely,
saddles were not amongst the goods imported. No doubt,
"' there was, firstly, a finding by the Collector that a trade
practice prevailed under which motor cycles and scooters H
40 SUPREME COURT REPORTS [ 1990] Supp. 1 S.C.R.

without tyres. tubes and saddles could be sold. Secondly.
A
the tyres and tubes could be had in the market here and so
also saddles, so that if an importer desired, he could have
sold these goods as motor cycles and scooters in CKD con-
dition. The argument was that since there was a restriction·
in entry 294 against imports of motor cycles and scooters in
B CKD condition, the importer could not be allowed to do
indirectly what he could not do directly.

The argument apparently looks attractive. But the question
is what have the respondents done indirectly what they
could not have done directly. In the absence of any restric-
tions in entry 295, namely, that a licence in respect of goods
c covered by entry 295 would not be valid for import of parts
and accessories which. when taken together. would make
them motor cycles and scooters in C.K.D. condition, the
respondents could import under their licence all kinds and
types of parts and accessories. Therefore, the mere fact.
D that the goods imported by them were so complete that
when put together would make them motor cycles and
scooters in C.K.D. condition, wou1d not amount to a
breach of the licence or of entry 295. Were that to be so, the
position would be anomalous as aptly described by the
High Court. Suppose that an importer were to import equal
E number of various parts from different countries under dif-
ferent indents and at different times, and the goods \\ere to
reach here in different consignments and on different dates
instead of two consignments from the same country as in
the present case. If the contention urged before us were to
be correct, the Collector can treat them together and say
F that they would constitute motor cycles and scooters in
C.K.D. condition. Such an approach would mean that
there is in entry 295 a limitation against importation of all
parts and accessories of motor cycles and scooters. Under
that contention, even if the importer had sold away the first
consignment or part of it, it would still be possible for the .
Collector to say that had the importer desired it was possi-
ble for him to assemble all the parts and make motor cycles
and scooters in C.K.D. condition. Surely, such a meaning
has not to be given to entry 295 unless there is in it or in the
licence a condition that a licensee is not to import parts in
such a fashion that his consignments, different though they
H rriay be, when put together would make motor cycles and
S.B. MACHINES v. COLLECTOR OF CUSTOMS [KASLIWAL, J.] 41

scooters in C.K.D. condition. Such a condition was
advisedly not piaced in entry 295 but was put in entry 294 A
only. The reason was that import of both moior cycles and
scooters as also parts arid accessories ihereof was permftied,
of the first under entry 294 and of the other under entry
295. A trader having a licence in respect of goods covered
by eritty 294 could import assembled motor cycles and
scooters, but not those vehicles in C.K,D. condition, unless
he was a manufacturer and had obtained a separate licence
therefore from the Controller of Imports who, as aforesaid,
was authorised to issue such a licence on an ad hoc basis.
Thus the restriction not to import motor cycles and scoo-
ters in C.K.D. condition was against an importer holding a
licence in respect of goods covered by entry 294 under c
which he could import complete motor cycles and scooters
and not against an importer had a licence to import parts
and accessories under entry 295.
1
If Dr. Syed Mohammad's contention were to be right we D
1 would have to import remark (ii) against entry 294 into
entry 295, a thing which obviously is not permissible while
construing these entries. further, such a condition, if one
were to be implied in entry 295, would not fit in, as it is a
restriction against import of motor cycles and scooters in
C.K.D. condition and not their parts and accessories. E
There is, therefore, no question of a licensee under entry
295 doing indirectly what he was not allowed to do directly.
What he was not allowed to do directly was importing
motor cycles and scooters in C.K.D. condition under a
licence under which he could import complete motor cycles
and scooters only. That restriction, as already observed; F
applied to a licensee in respect of goods described in entry
294 and not a licensee in respect of goods covered by entry
295.

- The result is that when the Collector examines goods
imported under a licence in respect of goods covered by
entry 295 what he has to ascertain is whether the goods are
G

parts and accessories, and not whether the goods, though
parts and accessories, are so comprehensive that if put
together would constitute motor cycles and scooters in
C.K.D. condition. Were. he to adopt such an approach, he
would be acting contrary to and beyond entry 295 under JI
~-
42 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.

A which he had to find out whether the goods imported were
of the description in that entry. Such an approach would, in
other words, be in non-compliance of entry 295."

This Court distinguished the case of Girdhari Lal Bansi Dhar
(supra) by making the following observation:
B
"It will be noticed that the Bombay decision in D. P.
Anand's case was not dissented from but only distin-
guished, and therefore, the High Court in the present case
was justified in following it. It is true, however, that
counsel for the appellant there relied on that decision in
support of his proposition that a ban on completed article
c cannot be read as a ban on the importation of its consti-
tuents, which, when assembled, would result in the pro-
hibited article, and this Court pointed out in answer that in
D.P. Anand's case, the imported components could not
,.
'I
have when assembled, made up the completed article
D because of the lack of certain essential parts which admit-
tedly were not available in India and could not be impor-
ted. The real distinction, however, between the two cases
was that the decision of the Collector in D.P. Anand's case .
was not, as was the decision in Girdhari Lat's case under
which of the two competing entries the imported goods fell
E but that the imported goods in question, if assembled
together, would not be the goods covered by the entry, and
therefore, not the goods in respect of which the licence was
granted. Further, the articles in question, even when
assembled together, were not prohibited articles as in
Girdhari Lal's case. Girdhari Lal case is clearly disting-
F uishable because it is not as if motor cycles and scooters are
prohibted articles as was the case there. The restriction is
not against licensees importing motor cycles and scooters
under entry 294 and parts and accessories under entry 295
but against the licensees under entry 294 importing motor
cycles and scooters in CKD condition. The question in the
G instam case was not under which of the two entries, 294 or
295, the goods fell, but whether the goods were parts and
accessories covered by entry 295."

Jn our view the Tribunal was not correct in placing reliance on )r

the case Union of India v. Tara Chand Gupta & Bros. (supra) in the
H facts and circumstances of the present case. In the case before us the
S.B. MACHINES v. COLLECTOR OF CUSTOMS [KASLIWAL, J.] 43

import of fully assembled copiers was prohibited. The appellant was A
only entitled to import 62% of the components. As already mentioned
above, the device adopted by the appellant in the present case was a
complete fraud on the Import Policy and the appellant was doing
indirectly what he was not permitted to do directly. We are further of
the view that the facts in the present case are more akin and similar to
the facts of the case Girdhari Lal Bansi Dhar v. Union of India, B
(supra) which was distinguished in the case of Union of India v. Tara
Chand Gupta & Bros. (supra).
~
Mr. Dholakia also tried to assail the finding recorded by the
CoHector and upheld by the Tribunal and argued that the componenfs
imported •by the appellant tallied with the parts which were permitted c
under the licence. We do not find any force in this submission. The
Collector has given detailed rea5ons for holding that the imported
goods were not covered by the valid licence and the Tribunal having
upheld such finding, the same cannot be challenged by the appellant
before this Court.
D
Mr. Dholakia also submitted that in the facts and circumstances
of the case the order confiscating the goods and imposing fine and
penalty both on the company and Sh. Sadanand, the Managing Di-
rector was too high and ought to be reduced.

We find no force in this submission as well. This is a case where E
the appellant had not only violated the terms and conditions of the
licence but also committed a fraud on the Import Policy itself. Thus we
find no ground or justification to reduce the penalty or fine.

~ In the result we find no force in these appeals and the same are
dismissed with one set of costs. F
r
P.S.S. Appeals dismissed.