M/S. Prabhat Publicity Thru. ... vs Union Of India Thru. Secty. & 2 Ors
2017 Latest Caselaw 3726 Bom

                                     1                                capl1.07.odt




        IN THE HIGH COURT OF JUDICATURE AT BOMBAY,

                           NAGPUR BENCH, NAGPUR


                      CUSTOMS APPEAL NO.1 OF 2007


M/s. Prabhat Publicity,
R/o. 2662, Kuchachella, 
Darya Ganj, New Delhi-110 002.
through its Proprietor
Mr.Vinod Gupta.                          .........    APPELLANT


      // VERSUS //


1.Union of India,
   through the Secretary,
   Ministry of Finance,
   New Delhi.

2.Commissioner of Customs and
   Central Excise, Nagpur.              ...........   RESPONDENTS


-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
 Mr.Sunil Manohar, Senior Counsel with Mr.Nikhil Gaikwad, Advocate 
                           for Appellant.
  Mr.S.N.Bhattad, Advocate with Mr.K.K.Nalamwar, Advocate for the 
                           Respondents.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-




      ::: Uploaded on - 15/07/2017                  ::: Downloaded on - 28/08/2017 08:25:04 :::
                                             2                                    capl1.07.odt

                                            CORAM     :  M.S.SANKLECHA
                                                             & MANISH PITALE, JJ.

DATE : 29.6.2017.

ORAL JUDGMENT (Per M.S.Sanklecha, J) :

1. This appeal under Section 130 of the Customs Act, 1962

(the Act) challenges the Order dated 24.8.2006 passed by the

Customs, Excise and Service Tax Appellate Tribunal (the Tribunal). By

the impugned order, a second had offset Printing Machine (Printing

Machine) imported by the appellant was held to be not a 'Capital

good'. Therefore, not freely importable under the EXIM Policy-2002-

07 and Foreign Trade (Development and Regulation) Act, 1992. Thus,

in the absence of necessary authorisation/licence from the Import

Control Authority, for the import, confiscation of the imported

Printing Machine under Section 111(d) of the Act by the

Commissioner of Customs was upheld. However, the redemption of

the Printing Machine was allowed on payment of redemption fine of

Rs.10 Lakhs alongwith penalty of Rs.1 Lakh under Section 112(a) of

the Act.

3 capl1.07.odt

2. This appeal was admitted on 14.8.2008 on the following

substantial questions of law :

1.Whether in the facts and circumstances of the case and in law the Tribunal erred in holding that the printing machine is not "Capital Goods" when the definition of the capital goods itself covers any plant, machinery, equipment or accessories required for manufacturer or production either directly or indirectly of goods for rendering services in terms of para 9.10 of the EXIM policy ?

2.Whether in the facts and circumstances of the case and in law the Tribunal has rightly interpreted the definition of Capital Goods while excluding the printing machines from the purview of the said definition when the said Tribunal subsequently has given a finding in the matter of CCE Nagpur versus M/s.Goyal Printing Press that printing machine was a capital good under EXIM policy and have given a finding that the goods are freely importable ?

3.Whether in the facts and circumstances of the case and in law the Tribunal was right in not considering the three classifications of printing

4 capl1.07.odt

machines under Central Excise Tariff, Customs Tariff as well as ITCHS under EXIM code, when under Central Excise Rules, all goods falling under chapter 84 covers only the Capital Goods which includes the printing machinery ?

4.Whether in the facts and circumstances of the case and in law the Tribunal was right in not quashing the confiscation and penalty under Section 112 of the Customs Act, 1962 when the Printing Machinery is freely importable good under the EXIM policy ?

3. The brief facts leading to this appeal are as under :

(a) The appellant is a printing and publishing house. In

2004, the appellant imported a second hand Printing Machine

(manufactured in 1995) for the purposes of its business. On

4.03.2004, the appellant filed the Bill of Entry for clearance of the

Printing Machine classifying it under Chapter 84, Heading 84.43 of the

Customs Tariff Act, 1975 valuing it at Rs.19.96 Lakhs. The clearance of

the Printing Machine was sought without any license/authorisation

5 capl1.07.odt

from the Import Control Authorities as, according to the appellant, it

was freely importable being a Capital goods, less than 10 years old in

terms of paragraph 2.33 of the EXIM Policy 2002-2007.

(b). However, according to the Revenue, the Printing Machine

was undervalued and also not freely importable. Therefore, the

Commissioner of Customs issued a show cause notice to the appellant

inter alia calling upon the appellant to show cause why Printing

Machine should not be confiscated under Section 111(d) of the Act as

the same did not satisfy the meaning of 'Capital Goods' in the EXIM

Policy 2002-07. Thus, in the absence of a license/authorisation from

the Import Control Authorities, the import contravened the provisions

of Section 3(3) of the Foreign Trade (D & R) Act, 1992 r/w. 11(1) of

the Act rendering it liable for confiscation under Section 111(d) of the

Act.

(c). The appellant responded to the same and pointed out that

the imported Printed Machine would satisfy the definition of 'Capital

Goods' as defined in para 9.10 of the EXIM Policy. Therefore, being

6 capl1.07.odt

second hand capital goods, it was freely importable in terms of para

2.33 of EXIM Policy 2002-2007.

(d) However, the Commissioner of Customs by an order dated

30.8.2005 did not accept the appellant's contention and held that the

Printing Machines do not fall in the definition of 'Capital Goods', as it

does not find mention in the inclusive part of the definition as found in

paragraph 9.10 of the EXIM Policy 2002-07. Further, he held that, in

terms of paragraph 2.33 of the Handbook of Procedures (Vol.1) of the

EXIM Policy 2002-2007, which list out second hand goods which could

be imported without license and in that list, Printing Machinery is not

mentioned. In the above view, he held that the imported Printing

Machine is liable for confiscation under Section 111(d) of the Act.

Besides, the Commissioner also enhanced valuation of the Printing

Machine from Rs.19.96 Lakhs as declared to Rs.42 Lakhs.

Consequently, the Printing Machine was confiscated under Section

111(m) and (d) of the Act on account of both valuation as well as on

goods being imported without appropriate license/authorisation

from the Import Control Authorities. However, the Printing Machine

was allowed to be redeemed on consolidated payment of fine of

7 capl1.07.odt

Rs.15 Lakhs and consolidated penalty of Rs.5 Lakhs was also imposed

upon the appellant on both counts i.e. undervaluation and absence of

licence/authorisation from the Import Control Authorities.

(e) The appellant, being aggrieved, filed an appeal to the

Tribunal on both the issues i.e. undervaluation and free importability

of the Printing Machine. The Tribunal by the impugned order dated

24.8.2006 held in favour of the appellant in respect of valuation and

found that the value declared by the appellant of Rs.19.96 Lakhs for

the import of Printing Machine was appropriate. Consequently,

confiscation on account of valuation under Section 111(d) r/w. (m) of

the Act was set aside. However, so far as the EXIM Policy issue is

concerned, the impugned order of the Tribunal upholds the view of the

Commissioner of Customs holding that the Printing Machine is not a

capital good in terms of paragraph 9.10 of the EXIM Policy. Thus, the

impugned order of the Tribunal upholds the findings of the

Commissioner on confiscation of Printing Machine for EXIM Policy

violation. However, the consolidated redemption (on valuation and

EXIM Policy) fine was reduced from Rs.15 Lakhs to Rs.10 Lakhs.

8 capl1.07.odt

Further penalty under Section 112(a) of the Act was reduced from Rs.

5 Lakhs to Rs.1 Lakhs.

4. Being aggrieved, the appellant/assessee is in appeal

before us.

5. Regarding Question No.1 :

(a). The impugned order of Tribunal upheld the view of the

Commissioner of Customs. This on the ground that, a plain reading of

paragraph 9.10 of the EXIM Policy 2002-07, Printing Machinery would

not fall within that definition of 'Capital goods'. Further it places

reliance upon a Notification No.31/2005, dated 19.10.2005 to

conclude that Printing Machine is not capital goods.

(b). For a proper appreciation of the controversy at hand, it

may be appropriate to reproduce the relevant provisions of the policy

and the handbook which would have a bearing on the question arising

for our consideration. The relevant provisions are as under :

9 capl1.07.odt

Para No. 9.10 of the EXIM Policy 2002-2007 is as under :

"9.10. "Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. Capital goods also include packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipments and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, and viticulture as well as for use in the services sector. "

Para Nos. 2.17 and 2.33 of the EXIM Policy 2002-2007 are as under :

"2.17. All second hand goods, shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, ITC (HS), Handbook (Vol.1), Public Notice or a License/certificate/permission/Authorisation issued in this behalf "

"2.33. Import of second hand capital goods, which are not more than 10 years old, shall be allowed freely."

Para 2.33 of the Handbook of Procedures 2002-07 :

10 capl1.07.odt

"2.33. Import of Second Hand Capital Goods :

Import of second hand capital goods including refurbished/reconditioned spares, shall be allowed freely, subject to conditions for following categories :

Import of second hand computers including personal computers and laptops is restricted. Import of refurbished/reconditioned spares will be allowed on production of a Chartered Engineer certificate that such spares have atleast 80 % residual life of original spare.

In case a capital goods is imported in parts at two customs stations, on account of bonafide logistical reasons, said imports may be allowed after satisfying that both consignments put together constitute a single capital goods."

(c). Mr.Sunil Manohar, learned Senior Counsel for the

appellant, in support of the appeal, submits that the definition of

'Capital goods' as set out in Para 9.10 of the Policy is very wide and

has been defined to mean any plant, machinery, equipment or

accessories required for manufacture, production or rendering of

services. In the present facts, it is not disputed that the Printing

Machine is being used for the purposes of printing and would,

therefore, be a machinery/equipment required for production/

manufacture and/or for rendering of services. Thus, it would be

covered by the definition of "Capital goods". It is submitted that the

11 capl1.07.odt

impugned order of the Tribunal has not examined the definition of

"Capital goods" as given in paragraph 9.10 of the EXIM Policy and

merely upheld the view of Commissioner of Customs. It is submitted

that the Commissioner of Customs has, while dealing with the

definition of 'Capital goods', completely ignored the first para of

definition of 'Capital goods' and rejected the claim of the appellant on

the ground that it is not mentioned in the inclusive part of definition

as reproduced hereinabove. It is submitted that, in terms of para 2.33

of the Policy, import of second hand Capital goods, which are not

more than 10 years old, are allowed freely. The Printing Machine as

imported does satisfy the above test. Therefore, the basis of the

impugned order holding that the Printing Machinery is not Capital

goods itself will not stand scrutiny. Further the reliance upon a

Notification No.31/05, dated 19.10.2005 is inappropriate as it is post

the import of the Printing Machine and could have no application. In

any case, it is submitted that, in the present facts, the redemption fine

and penalty should be nominal, if at all.

(d). As against the above, Mr.S.N.Bhattad, learned Counsel

appearing for the Revenue supports the impugned order of the

12 capl1.07.odt

Tribunal for the reasons mentioned therein as well as for the reasons

in the order of Commissioner dt.30.8.2005. It is submitted that no

interference with the impugned order is warranted.

(e) From the definition of 'Capital goods' as set out

hereinabove, it is evident that it has been defined in two parts. The

first part defines 'Capital goods' to mean any plant, machinery etc

required for manufacture/production/rendering services. While the

second part which is an inclusive part lists out various machines which

would also be classifiable as 'Capital goods'. The impugned order of

the Tribunal has not examined the definition of "Capital goods' as

provided in para 9.10 of the Policy; but, it merely upheld the view of

the Commissioner of Customs. In turn, the Commissioner of Customs

in his order dated 30.8.2005 has completely ignored the first part of

definition of "Capital goods" and only as on account of the fact that

Printing Machine is not listed in the inclusive part of that definition,

concludes that it is not capital goods. It is a settled position in law that

when the definition in Section is defined to "mean" such and such then

such a definition would be prima facie restrictive and exhaust the

entire universe of the thing defined. The word "includes" is prima facie

13 capl1.07.odt

extensive/expansive and the particular items referred to after the word

'includes' would only be illustrative and not exhaust the universe of the

word sought to be defined. In this case, the first part of the definition

of capital goods in para 9.10 of the EXIM Policy uses the word 'means'

and the second part of the definition uses the word 'includes'.

Therefore, in the first part of the definition the plant, machinery,

equipment or accessories which are required for manufacture/

production/rendering services, would be Capital goods. In this case, it

is not disputed before us that the Printing Machine would be a

machinery required for manufacture/production of goods as it falls

under Chapter 83 of the Customs Tariff Act, 1975 or in any event, it

would be used in rendering services. Therefore, the Printing Machine

would fall within the first part of the definition of 'capital goods' as set

out in paragraph 9.10 of the EXIM Policy.

(f) So far as the second part of that definition is concerned, it

is an inclusive definition and it only lists out various items which

would be considered to be Capital goods, even if they are not per se

used in manufacture/production/rendering of services. Therefore, in

the inclusive part of the definition, instruments required for testing

14 capl1.07.odt

and research are considered to be Capital goods, even if they are not

required for manufacture/production/rendering services.

(g) In fact, the manner in which a definition section which

uses the words "means" and "includes" as found in paragraph 9.10 of

the Policy, is to be interpreted, is long settled by the Apex Court.

Attention is invited to the decision of the Supreme Court in Black

Diamond Beverages and another .vs. Commercial Tax Officer,

Central Section, Assessment Wing, Calcutta and Others, (1998) 1

SCC 458. We can do no better then not only extract the definition it

was considering alongwith its observation/view with regard to the

manner in which definitions sections using the words 'means'.... and

'includes' are to be construed as under :

"5. The 1954 Act generally provides for levy of a single- point tax at the first stage on commodities notified under Section 25 of that Act. On the other hand, the 1941 Act is a general statute providing for multipoint levy of sales tax on commodities not covered by the 1954 Act. Sub-clause (d) of Section 2 of the 1954 Act reads as follows :

"2.(d) 'sale-price used in relation to a dealer means the amount of the money consideration for the sale of notified commodities manufactured, made or processed by him in West Bengal, or brought by him into West Bengal from any

15 capl1.07.odt

place outside West Bengal, or brought by him into West Bengal, less any sum allowed as cash discount according to trade practice, but includes any sum charged for containers or other materials for the packaging of notified commodities;" (emphasis supplied).

6.We shall first deal with the contention of the appellants' counsel based upon the non-inclusion of "freight charges" in the definition of sale price in Section 2(d) of the 1954 Act.

7.It is clear that the definition of "sale price" in Section 2(d) uses the words "means" and "includes". The first part of the definition defines the meaning of the word "sale price" and must, in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in no way controlled or affected by the second part which "includes" certain other things in the definition. This is a well-settled principle of construction. Craies on Statute Law (7th Edn., 1.214) says :

"An interpretation clause which extends the meaning of a word does not take away its ordinary meaning.... Lord Selborne said in Robinson v. Barton-Eccles Local Board AC at p.801 :

" An interpretation clause of this kind is not meant to prevent the word receiving its ordinary, popular, and natural sense whenever that would be properly applicable, but to enable the word as used in the Act... to be applied to something to which it could not ordinarily be applicable. "

Therefore, the inclusive part of the definition cannot prevent the main provision from receiving its natural meaning". (emphasis supplied)

16 capl1.07.odt

(h). In fact, the Commissioner of Customs, whose view has

been upheld by the impugned order of the Tribunal, has restricted the

meaning of 'Capital goods' only to those items which find mention in

the inclusive part of the definition. It completely ignores the earlier

part of the definition of 'Capital goods' which has been defined to

mean any machinery, equipments used for manufacture/

production/rendering services. On the above partial reading it

concluded that the Printing Machine is not mentioned in the inclusive

part and therefore, does not satisfy the definition of 'Capital goods' in

paragraph 9.10 of the EXIM Policy. This is not permissible. In fact,

Justice G.P. Singh in his book "Principle of Statutory Interpretation"

14th Edition while setting out how a definition, which uses the word

'mean' as well as 'include', is to be understood has stated at page

no.199 thereof as under :

" A definition which defines a word to mean A and to include B and C cannot in its application be construed to exclude A and to include only B and C. "

                                            17                                    capl1.07.odt

(i).           The   Commissioner   of   Customs   as   well   as   the   Tribunal 

have, while construing the definition of 'Capital goods' have proceeded

on the basis that it only includes items mentioned in the inclusive part

of the definition and completely ignored the earlier part of the

definition which begins with the word 'means'. In the above view, we

are of the view that the Printing Machinery at the time of import

would satisfy the definition of 'Capital goods' as provided in the first

part of paragraph 9.10 of the EXIM Policy.

(j) The reliance upon Para 2.33 of the Handbook of

Procedures 2002-07 as existing at the time of import i.e. 4 March,

2004 does not in any manner advance the case of the Revenue.

Further placing reliance upon subsequent amendments by virtue of

Notification No.31/05, dated 19.10.2005 has no application to the

present facts.

(k) In the above view, question no.1 is answered in the

affirmative i.e. in favour of the appellant/assessee and against the

respondent/Revenue.

18 capl1.07.odt

6. In view of our answer to question no.1, questions nos. 2

to 4 are not being pressed by the appellant. Therefore, they do not

arise for consideration. Accordingly, the appeal is allowed. No order as

to costs.

                                 JUDGE                      JUDGE



 jaiswal