THE BRITISH MACHINERY SUPPLIES CO.versusTHE UNION OF INDIA AND ORS.

A               THE BRITISH MACHINERY SUPPLIES CO.
                                v.
                   THE UNION OF INDIA AND ORS.

                                AUGUST 6, 1996
B
                 [S.P. BHARUCHA AND K.T. THOMAS, JJ.]

         Customs Act, 1962-Tariff Schedule items-84.2/84.4(1~Imp01t of
  components of industrial sewing machine rotating hooks with bobbin
C case-Higher duty charged treating the goods as components of domestic
  sewing machines-Appellate Collector held that goods imported are not for
  do111estic sewing 1nachines-Revision-Govenunent of India annulled of order
  Appellate Collector-Held, the Govemment of India have wrongly exercised
  revisional power by inte1fering with the decision of the Appellate Collec-
  tor-Order set aside.
D
          The appellant firm was engaged in manufacturing sewing machines
    and accessories. It imported components of industrial sewing machines,
    which were liable to customs duty at the rate of 40% as per item 84.41(1)
    of the Customs Tariff Schedule. The Assistant Collector of Customs
    charged higher duty treating the goods as compone:its for domestic sewing
E   machines - under clauses (2) item 84.2. Appellant paid higher duty &nd
    applied for refund Application made before Assistant Collector was
    rejected. The statutory appeal before the Appellate Collector of Customs
    was allowed on the ground that the goods imported were not for domestic
    se\\ing machines. Since excess amount paid was not refunded, ·the appel-
F   Ian! filed a writ petition in the High Court for appropriate directions. In
    the meantime, the Government of India in exercise of its revisional power
    annulled the order passed by the Appellate Collector of Customs. Hence
    the present appeal.

          The contention of the appellant was that the Central board of Excise
G and Customs had clarified that the ordinary sewing machines used in the
    house or-by tailors or dress makers etc., to be manned by manual labour
           - have less then 1/4 HP would continue to be considered as
    or whiCh
    domestic sewing machines. It was further contended that the Government
    of India had gone beyond its powers in interfering with the findings of fact
H   arrived at by the Assistant Collector.
                                        294                                        .-
                                                                                   ._   -
               BRITISH MACHINERY SUPPLIES CO. v. U.0.1.                  295

        The respondents contended that classification as per tariff cannot be A
determined on the basis of what the Collector of Central Excise and Cus-
toms or the Board of Central Excise would have thought about it because
it is a legislative process and its interpretation should be in accordance with
law. It "as further contended that a particular horse power for the motor
attached to the machines may or may not be decisive in coming to the con-
clusion that the component is principally used for domestic se"ing machines.
                                                                                B

      Allowing the appeal, this Court

       HELD : 1. The Government of India had wrongly exercised its
revisional powers by interfering with the decision of the Appellate Collector
that the goods imported were not for domestic sewing machines and as such
                                                                                c
they were classified under Item 84.41(1) of the Schedule. (300-E-F; 297-A]

      2. The very licence granted to the appellant contains a description
which cannot normally be marginalised in reaching a conclusion on this
disputed aspect. A list of components to bt imported during the licensing       D
period is appended with the licence. it starts with the description that the
components are for industrial sewing machines. The first item in that list
is "rotating hooks complete with bobbin case" which is the component
involved in this case. (298-E-F]

      3. The circular issued by Central Board of Excise and Customs             E
cannot be over looked. It is binding on the department as they have made
it known to all concerned that sewing machines .covered by motors of 1/4
HP or more would fall outside the scope of the term "domestic sewing
machines". The relevant heading in the tariff i.e. 84.41 uses the expression
"domestic sewing machines,, and put all the other sewing machines in the
residuary category "not elsewhere specified". When the Customs officials        F
themselves have understood that sewing machines designed for operation
powered by motor of 1/4 HP or more would fall outside the scope of domes-
tic sewing machines, it would be inept to suggest that they should adopt a
different stand when mulcting the importer with duty unless there is a
judicial pronouncement on the matter. (299-D-F]                                 G
      Para Enginee1ing Works, New Delhi v. Collector of Customs, New Delhi,
(1987) 27 ELT 668, approved.

      Nutsteel Equipment P1ivate Limited v. Collector of Central Excise,
(1988) 34 ELT 8 Viswa & Co. v. State of Gujarat, 17 STC 581, referred to. H
    296                     SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A           Universal Encyclopaedia of machines, (Vol. I) referred to.

            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3035 of
    1979.

            From the Judgment and Order dated 24.8.79 of the Government of
B India Ministry of Finance (Department of Revenue and Expenditure),
    North Block, New Delhi in Order No. 91-B of 1979.

            M.L. Verma, Mrs. Rani Chhabra for the Appellants.

C           J. Vellapally, V.K. Verma and G. Prakash for the Respondents.

            The Judgment of the Court was delivered by

         THOMAS, J. This appeal by special leave is in challenge of an order
    passed by the Government of India, in exercise of their revisional power
D   under the Customs Act. 1962 (for short 'the Act'). As per the impugned
    order Government annulled the order passed by the Appellate Collector
    of Customs in favour of the appellant on 6.12.1978.

            Facts are, in brief, these :

E         Appellant firm has a factory for manufacturing sewing machines and
    accessories at Faridabad, with an approved capacity for making both
    domestic as well as industrial sewing machines. Appellant imports com-
    ponents for manufacturing such sewing machines from foreign suppliers.
    In October, 1977, appellant imported components of industrial sewing
F   machines-11 rotating hooks complete with bobbin case", some of which
    required 1/3 H.P. and the others required 1/2 H.P. for their operation.
    According to appellant such imported components were dutiable at the
    rate of 40 per cent to customs duty as per item 94.41(1) of the Customs
    Tariff Schedule and hence appellant was payable customs duty in accord-
    ance with its. But the Assistant Collector of Customs (foreign Post), New
G   Delhi charged higher duly by treating those goods as components for
    domestic sewing machines as prescribed under clause (2) of heading 84.2
    of the Schedule. Appelfont paid the higher duty under protest and got the
    goods released and later applied for refund of the excess amount paid (i.e.
    Rs. l,78,208). The Assistant Collector rejected the application reiterating
H   that the goods imported were components for domestic sewing machines.
           BRITISH MACHINERY SUPPLIES CO. v. U.O.l. [TifOMAS,J.J           297

          Appellant then filed a statutory appeal before the Appellate Collec- A
    tor of Customs who allowed the appeal holding that the goods imported
    were not for domestic sewing machines and as such they were classifiable
    under item 84.41(1) of the Schedule. Thus the appellant became entitled
    to refund of the amount paid in excess. But appellant failed to get the
    refund applied for, inspite of pursuing the applications filed for that
                                                                               B
    purpose. So a writ petition was filed in the High Court of Delhi for
    appropriate directions. Notice was served on the Central Government
    They proposed to review the order for which a notice was given to the
    appellant to show cause why it should not be reviewed. Appellant sub-
    mitted its detailed reply. Central Government after hearing the appellant
    passed the impugned order.                                                    c
          Appellate Collector concurred with the importer's stand that the
    components were intended for industrial sewing machines on the strength
    of a variety of reasons and on its own satisfaction when the difference was
    demonstrated before him, during the time of hearing. He noticed that "the     D
    rotating hook in the industrial machine had higher speed than the domestic
    sewing machine and if the rotating pin of the industrial sewing machines
-   were to be attached to the domestic se\ving machines, it would not
    withstand the speed and would break." Appellate Collector, therefore, was
    convinced that the hooks imported by the appellant were not for domestic
                                                                                  E
    sewing machines and were "solely and principally for use in machines
    operated with more then 1}4 H.P. and as such are classifiable under !CT
    84.41(1)".

          Government of India differed from the above conclusion, mainly on
    the premises that (1) "the rotating hooks complete with bobbin case" find
                                                                                  F
    their use in domestic as well as other sewing machines, but their principal
    use lies in domestic sewing machines, (2) the term sewing machine should
    have been understood in the manner it is understood in international
    market/trade for purposes of customs classification, and (3) the correspon-
    dent heading in the Brussels Tariff Nomenclature (BTN) covers two types       G
    of sewing machines, namely, (a) ordinary sewing machines used in homes
    or by tailors or dress-makers etc., (b) special machines which can be used
    only for certain other kinds of sewing (as enumerated therein).

          Learned counsel for the appellant contended that the Government H
    298                   SlJPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A   of India have gone far beyond its powers in interfering with a fact finding
    arrived at by the Appellate Collector for which many extraneous materials
    were improperly used. At any rate the view adopted by the Appellate
    Collector should have been accepted as a reasonable conclusion on the
    facts, according to the counsel.

B         Item 84.41 of the Customs Tariff Schedule, which was brought into
    force of 1.1.1977, read thus :

            "84.41 -Sewini; machines; furniture specially designed for sewing
            1nachines; sewing machine needles;

c           (l) Not elsewhere specified - 40%

            (2) Domestic sewing machines - 100';7,,

          If the imported components were for domestic sewing machines then
    the Central Government is right in insisting on the customs duty realised
D   from the appellant. The language in which the item in the schedule is
    couched indicates that one category relates to a specific specie i.e. "domes-
    tic sewing machines", and the other is a general category i.e. 11 not else-
    where specified". Apparently the burden is on the revenue if they want to
    include the imported materials with the specific category to substantiate
                                                                                    -
E   that those materials are such.

          The very licence granted to the appellant contains a description
    \vhich cannot normally be marginalised in reaching a conclusion on thKs
    disputed aspect. A list of components lo be imported during the licensing
    period is appended with the licence. It starts with the description that the
F   components are for industrial sewing machines. The first item in that list
    is "rotating hooks complete with bobbin case" which is the component
    involved in this case.

          In the Letter of Credit, granted by the Foreign Exchange Branch of
    syndicate Bank under which the components were imported, the com-
G   modities are described as components of industrial se\ving machines.
    learned counsel for the appellant produced a letter dated 8.2.1977, which
    was addressed to G1e Collector of Customs and Central Excise, New Delhi,
    by the Central Board of Excise and Customs, Copy of which had been
    forwarded to the subordinate officers. The letter contains a reference to
H   the minutes of the conference of Collectors of Customs on tariff classifica-
       BRITISH MACHINERY SUPPLIES CO. v. U.O.l. [IBOMAS, J.]           299

tion matters, held in November, 1976, in which the Board of Central Excise    A
and Customs agreed that "the ordinary sewing machines used in the home
or by tailors, dress-makers etc. to be worked by manual labour or which
require for their operation less than 1/4 H.P. may continue to be con-
sidered as don1estic se\ving machines whereas 'industrial sewing machines'
essentially designed for operation powered by motors of 1/4 H.P. or more
                                                                              B
would fall outside the scope of term 'domestic sewing machines', " Much
reliance is sought to be made on this circular. The only conclusion that
can be arrived at, if the said circular as any use, is that the imported
materials in this case are usable for industrial sewing machines.

       Shri Joseph Vellapally, learned senior counsel who argued for the C
respondents, contended that classification as for tariff cannot be deter-
mined on the basis of what the Collectors of Central Excise & Customs or
even what the Board of Central Excise and Customs would have thought
about it because it is a legislative process and its interpretation should be
in accordance with law. We cannot overlook the said circular which is, at D
least, binding on the department as they have made it known to all
concerned that sewing machines covered by motors of 1/4 H.P. or more
would fall outside the scope of the term 11 domestic sewing machines 11 • It
must be borne in mind that the heading concerned in the tariff i.e. 84.41
uses the expression "domestic sewing machin'Cs" and put all the other
sewing machines in the residuary category "not elsewhere specified", when     E
customs officials themselves have understood that se\\·ing machines
designed for operation powered by motor of 1/4 H.P. or more would fall
outside the scope of domestic ~ewing machines, it would be inept to suggest
that they should adopt a different stand when mulcting the importer with
duty unless there is a judicial pronouncement on the matter.                  F

       Learned counsel for the respondent invited our attention to a refer-
ence made in the Universal Encyclopedia of Machines (Vol.1) to the effect
that the present day domestic sewing machine is usually driven by an
electric motor. Hence it was contended that a particular horse power for
the motor attached to the machines may or may not be decisive of the G
question whether a component is principally used for domestic sewing
machines. True that horse power is not the only factor to determine it.

      Learned counsel for the respondent invited our attention to a
decision of this Court in Nat Steel Equipment Private Ltd. v. Collector of H
    300                  SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A Central Excise, 1988 (34) ELT 8, where this Court was concerned with
    "domestic electrical appliances" mentioned in explanation I of Tariff Item
    33 (c) which was in force at the relevant time. Their Lordships referred to
    an earlier decision of the Gujarat High Court in Viswa & Co. v. State of
    Gujarat, 17 STC 581 in which Bhagwati, J. (as the learned Chief Justice
    then was) has observed that to make an electrical appliance a domestic
B   electric appliance "what is necessary is that it must be of a kind which is
    generally used for household work". But in this case there is no material
    to show that a sewing machine fitted with the type of components imported
    by the appellant is generally used in household work.

c in ParaWeEnginecn.ng
            find that the observations made by the Special Bench of CEGAT
                        works, New Delhi v. Collector of Custonis, New Delhi,
    (1987) 27 ELT 668, as more appropriate to the facts of this case. A
    manufacturer, importing to some components of industrial Fewing
    machines with a motor of 1/4 H.P. had to approach the Special Bench as
    a similar question was raised by the customs officials. The Tribunal noted
D   that each Bill of Entry pertaining to the import in that case contained
    reference to the invoices which were properly co-related with the bills.
    Those documents contain the description that the components were for
    industrial se\ving machines. \ssessment made under a different item in-
    spite of such invoices was held. to be unsustainable. The position in this
E   case is almost similar.
                                      \
          From the above discussion we come to the conclusion that Govern-
    ment of India ha•;e wrongly exercised revisional powers by interfering with
    the decision of the Appellate Collector. We, therefore, allow the appeal
    anJ set aside the impugned order. There shall be no order as to costs.
                                                            I
F
    S.V.K.I.                                            /       Appeal allowed.
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