# COMMISSIONER OF CUSTOMS (GENERAL), NEW DELHI ETC. ETC v. MIS. GUJARAT PERSTORP ELECTRONICS LTD. ETC. ETC

- **Citation:** [2005] Supp. 2 S.C.R. 389
- **Court:** Supreme Court of India
- **Decided:** 2005-08-05
- **Case number:** Civil Appeal Nos. 8565-8569 of 2001
- **Bench:** Ruma Pal, ARlJIT PASAYAT, C.K. Thakker
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-customs-general-new-delhi-etc-etc-v-mis-gujarat-perstorp-20933
- **Pages:** 32

## Headnote

Customs and Tariff Act, 1975-First Schedule-Chapter Headings
49.06 and 49.11-Customs Act, 1962-Section 28(/), 11 l(m) and /12Dra1vings, designs and plans imported under technical "Know Ho1v" and
"Basic Engineering Agree1nent"-Assessee clain-1ed exemption from custor.1s
duty placing imported goods as ''printed books" under chapter heading
49. 06-Revenue placed them under Chapter 49.11 holding them to be
manuals or brochures pertaining to processes-Duty demanded was confirmed
A
B
c
and pena/ities imposed-CEGAT allowed appeal on the. basis of its larger
Bench judgment-larger Bench judgment of CEGAT overruled later on, in
another matter-On appeal, niatter referred to a larger Bench owing to
subsequent overruling of the judgment followed by CEGA T and conflicting
ratios of certain judgments-Held, a clear error of law con1mitted while
overruling the larger Bench decision followed by CEGAT-Facts and
circumstances of a case should decide whether draiving, designs and plans
could be said to be a "book" or not-49.01 is the basic heading dealing with
''printed books" and 49.11 covers other printed 111aterial, maJ.. ·ng, it a
residual entry-Priority to be given to the n1ain enlly and not the residual
entry-if covered by a specific item, the residuary item has no applicationMatters remitted back as other rival contentions lvere not considered in the
F
backdrop of the larger Bench judgment of CEGAT-Export and Import
Policy, 1992-1997-Para 14.
D
E
Mis. P, Ltd. set up a new plant on the basis of a technical "Know
How" and "Basic Engineering Agreement" with Mis Z of Germany,
Revenue Intelligence was informed that Mis. P, Ltd. had imported actual
goods under the Export Promotional Capital Goods Scheme (EPCG) at
a concessional rate of duty and thereafter diverted some of the goods to
G
the local market, violating conditions of import under Para 14 of the
Export and Import Policy 1992-97. All documents and details were
scrutinized along with physical inspection of imported goods, which
H
389
A
B
c
D
E
F
G
390
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
indicated no such divergence. However, it was noticed that designs,
drawings and plans were imported under the said agreement without
payment of the appropriate amount of customs duty. A show cause notice
was issued under Section 28 (1) of the Customs Act, 1962 asking as to why,
the requisite duty should not be demanded; an amount of Rs. 20,00,000
deposited voluntarily should not be adjusted against the duty demanded;
the goods i.e. drawings, designs, plans etc. imported in three consignments
should not be held liable to confiscation under Section 111 (m) of the Act
and penalty should bot be imposed under Section 112 of the Act. The
reply stated that as per the Bill of Entry, the imported goods were in the
category of "books" under Chapter Heading 49.06 in the First Schedule
to the Custom and Tariffs Act, 1975, exempted by various Government
notifications. Therefore, reassessment under Chapter Heading 49.11 was
refuted as drawings, design plants etc. could be classified as "printed
books".
The Commissioner of Customs held that the imported goods pertained
to processes and were in the shape of manuals, brochures or leaflets,
distinguishable from printed books, making them liable for customs duty.
The duty demanded was confirmed, the voluntary deposit was adjusted,
a penalty of Rs. 1 Crore was imposed along with penalizing the Chairmancum-Managing Director and the Director of M(s. P. Ltd. They and Mis.
P. Ltd. filed three appeals in CEGAT, whereas the Revenue filed two
cross appeals for enhancement of penalties. CEGAT noted that a previous
decision of its larger Bench of the same issues was binding on it, therefore,
set aside the order in challenge and also dismissed the cross appeals.
Aggrieved by this order th~ Revenue prefer~ed these appeals, which were
referred to a larger Bench owing to overruling of the judgment upon
which CEGAT had based its order. The judgment, overruling the larger
Bench of

## Text

_Characters 0–39,928 of 70,009. This is a partial read: ask again with offset=39928 for what follows._

COMMISSIONER OF CUSTOMS (GENERAL),
NEW DELHI ETC. ETC.
v.
MIS. GUJARAT PERSTORP ELECTRONICS LTD. ETC. ETC.
AUGUST 5, 2005
[RUMA PAL, ARlJIT PASAYAT AND C.K. THAKKER, JJ.]
Customs and Tariff Act, 1975-First Schedule-Chapter Headings
49.06 and 49.11-Customs Act, 1962-Section 28(/), 11 l(m) and /12Dra1vings, designs and plans imported under technical "Know Ho1v" and
"Basic Engineering Agree1nent"-Assessee clain-1ed exemption from custor.1s
duty placing imported goods as ''printed books" under chapter heading
49. 06-Revenue placed them under Chapter 49.11 holding them to be
manuals or brochures pertaining to processes-Duty demanded was confirmed
A
B
c
and pena/ities imposed-CEGAT allowed appeal on the. basis of its larger
Bench judgment-larger Bench judgment of CEGAT overruled later on, in
another matter-On appeal, niatter referred to a larger Bench owing to
subsequent overruling of the judgment followed by CEGA T and conflicting
ratios of certain judgments-Held, a clear error of law con1mitted while
overruling the larger Bench decision followed by CEGAT-Facts and
circumstances of a case should decide whether draiving, designs and plans
could be said to be a "book" or not-49.01 is the basic heading dealing with
''printed books" and 49.11 covers other printed 111aterial, maJ.. ·ng, it a
residual entry-Priority to be given to the n1ain enlly and not the residual
entry-if covered by a specific item, the residuary item has no applicationMatters remitted back as other rival contentions lvere not considered in the
F
backdrop of the larger Bench judgment of CEGAT-Export and Import
Policy, 1992-1997-Para 14.
D
E
Mis. P, Ltd. set up a new plant on the basis of a technical "Know
How" and "Basic Engineering Agreement" with Mis Z of Germany,
Revenue Intelligence was informed that Mis. P, Ltd. had imported actual
goods under the Export Promotional Capital Goods Scheme (EPCG) at
a concessional rate of duty and thereafter diverted some of the goods to
G
the local market, violating conditions of import under Para 14 of the
Export and Import Policy 1992-97. All documents and details were
scrutinized along with physical inspection of imported goods, which
H
389
A
B
c
D
E
F
G
390
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
indicated no such divergence. However, it was noticed that designs,
drawings and plans were imported under the said agreement without
payment of the appropriate amount of customs duty. A show cause notice
was issued under Section 28 (1) of the Customs Act, 1962 asking as to why,
the requisite duty should not be demanded; an amount of Rs. 20,00,000
deposited voluntarily should not be adjusted against the duty demanded;
the goods i.e. drawings, designs, plans etc. imported in three consignments
should not be held liable to confiscation under Section 111 (m) of the Act
and penalty should bot be imposed under Section 112 of the Act. The
reply stated that as per the Bill of Entry, the imported goods were in the
category of "books" under Chapter Heading 49.06 in the First Schedule
to the Custom and Tariffs Act, 1975, exempted by various Government
notifications. Therefore, reassessment under Chapter Heading 49.11 was
refuted as drawings, design plants etc. could be classified as "printed
books".
The Commissioner of Customs held that the imported goods pertained
to processes and were in the shape of manuals, brochures or leaflets,
distinguishable from printed books, making them liable for customs duty.
The duty demanded was confirmed, the voluntary deposit was adjusted,
a penalty of Rs. 1 Crore was imposed along with penalizing the Chairmancum-Managing Director and the Director of M(s. P. Ltd. They and Mis.
P. Ltd. filed three appeals in CEGAT, whereas the Revenue filed two
cross appeals for enhancement of penalties. CEGAT noted that a previous
decision of its larger Bench of the same issues was binding on it, therefore,
set aside the order in challenge and also dismissed the cross appeals.
Aggrieved by this order th~ Revenue prefer~ed these appeals, which were
referred to a larger Bench owing to overruling of the judgment upon
which CEGAT had based its order. The judgment, overruling the larger
Bench of CEGAT also fell in conflict with the ratio of a later judgment.
The appellants contended that as the judgment upon which CEGAT
had based its order had been overruled so the present appeals deserve
to be allowed; and that in the alternative remand the matter back to
CEGAT as various points raised at the time of hearing were not considered
owing to the application of the larger Bench judgment followed by CEGAT.
The respondents contended that the view taken by the larger Bench
H
of CEGAT was correct and therefore could not have been interfered in
COMMR. OF CUSTOMS v. GUJARAT PERSTORP ELECTRONICS LTD. 391
appeal; that overruling the judgment of the larger Bench of CEGAT by
A
distinguishing the case from various earlier decisions was improper and
also conflicting in view of the ratio of a later judgment.
Allowing the appeals, the Court
HELD : 1.1. In popular sense, "books'' means a collection of a
number of leaves or sheets of paper or of other substance, blank, written
or printed, of any size, shape and value, held together along one of the
edges so as to form a material whole and protected on the front and back
with a cover of mor<> or less durable material. One must refer not only
I
to the physical, but/also functional characteristic of "books". It must be
functionally useful for the purpose of assessee's busint>Ss or profession.
It must be tool of his trade- an article which must be part of the apparatus
with which his business or profession was carried on. It must have utility
value enabling its owner to pursue his business or profession with greater
advantage. It must, thus, satisfy a dual test. It must bear both physical
and functional characteristics of a book. It must be a collection of a
number of sheets of paper or of other substance, having suitable size,
shape and value, bound together at one edge so as to form a material
whole and protected on the front and back with covers of some kind and
functionally useful to the assessee for carrying on his business or profession.
(411-A-D]
1.2. The two Judge Bench proceeded on the basis of the submission
on behalf of the Revenue wherein it was contended that a book rrust have
certain features, in the absence of which it could not be a book. When
the expression book is not defined in the Act, the natural and ordinary
meaning of the said expression must be kept in view. The proper way was
to come to a conclusion that the deciding factors would be the facts and
circumstances ofa case so as to conclude, whether Drawings, Designs and
Plans in a case on hand could be said to be a "book", or not. A clear error
of law has been committed, by not doing so. [415-G-H; 417-B-D]
Associated Cement Co. Ltd. v. Commercial Tax Officer, [2001] 4 SCC
593, relied on.
Scientific Engineering House Ltd. v. CIT, [1986) 1 SCC 11;
. · Parasrampuria Synthetics Ltd. v. Commissioner of Customs, New Delhi,
(2000) 119 ELT 211; (2000) 38 RLT 846 (L.B.); Mitutronics v. Collector
of Customs, (1990) 46 ELT 500; Roto Inks (P) Ltd. v, Collector o/Cusoms,
B
c
D
E
F
G
H
A
B
c
392
SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.
(1990) 47 ELT 398; Tata Consultancy Services v. Cqllectur of Customs,
(1991) 53 ELT 454; Collector a/Customs, Madras v. Tata Elxsi India Ltd,
(1995) 78 EL T 370; Lakshmi Cement v. Collector of Custom, New Delhi,
(1996) 84 ELT 271 and Commissioner of Income Tax, Gujarat v. Elecon
Engineering Company Ltd., (1974) 96 ITR 672 (Guj.), approved.
Commissioner of Customs, New Delhi v. Parasrampuria Synthetics Ltd.,
[2001I9SCC74; Tractors and Farm Equipment Ltd. v. Collector a/Customs,
(1993) 68 ELT 234, overruled.
Pretyman v. Pretyman, (1931) 1 Ch. 521; Yarmouth v. France, [1887)
19 QBD 647 and Inland Revenue Commissioners, v. Barclay Curle & Co.
Ltd., (1970) 76 ITR 62 (HL), referred to.
Penguin English Dictionary; Concise Oxford Dictionary; New Webster's
Dictionary; Words and Phrases (Permanent Edition), referred to.
2. The matter could be looked at from another angle also. Harmonized
D
System of Nomenclature (HSN) has dealt with the relevant point and as
per Explantory Note, it would fall under Chapter Heading 49.01. Therefore,
sub-heading 4911.99 would not cover it. Therefore, even that aspect has
to be considered and kept in mind while de<:_iding as to whether Drawings
Designs and Plans could or could not be said to be 'printed book' covered
E
by Chapter Heading 49.01, 49.06 or sub-heading 4911.99.
[418-B-C; 419-A-B)
Collector of Central Excise, Shillong v. Wood Craft Products Ltd,
[1995) 3 sec 454, relied on.
Collector a/Central Excise Hyderabadv. Backelite Hy/am Ltd, [1997)
F
10 sec 350 and Collector of Customs, Bombay v. Business Forms Ltd Thr.
G
H
O.L., (2002) 142 ELT 18 SC, affirmed.
3. It is neither disputed nor can be disputed that the basic heading
is 49.01, \\'.hich deals with "Printed books, brochures, leaflets and similar
)
printed matter, whether or not in single sheets." 49.11 covers "other
printed matter, including printed pictures and photographs". Thus specific
or basis heading is 49.01 and residual entry is 49.11. Therefore, priority
has to be give to the main entry and not the residual entry. A residuary
item can be referred to and such item can be applied only when goods
are shown to be not falling under any other specific item. If a specific item
covers them, the residuary item has no application. (419-B-E]
..
...
COW.1R. OF CUSTOMS 1·. GUJARAT PERSTORP ELECTRONICS LTD. [THAKK.ER, J.] 393
Associated Cement Companies Ltd. v. Commissioner of Customs, (2001]
4 sec 593, relied on.
Indian Metals and Ferro Alloys Ltd., Cuttack v. Collector of Central
Excise, Bhubaneshwar, (1991] Supp. 1 SCC 125; Bharat Forge & Press
Industries v. Commissioner of Central Excise, [1990] 1SCC532, affirmed.
4. All contentions raised by the assessee have to be dealt with and
decided in the light of relevant statutory provisions of the Act and the
Rules as also on basis of decided cases on the point. CEGAT disposed of
all the appeals merely on the basis of its larger Bench decision without
considering rival contentions on merits nor recorded findings thereon, so
it would be appropriate and in the fitness of things to remit the matters
to CEGAT, now Customs, Excise and Service Tax Appellate Tribunal
(CESTAT) to decide them on all points in accordance with law in the light
of the present observations. The order passed by CEGAT is set saide.
[419-H; 420-A-C)
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8565-8569
of 2001.
A
B
c
D
From the Judgment and Order dated 19. 12.2002 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. Nos.
426-430/2000-D in A. Nos. C/402-404/98-D, C/417 and C/466 of 1997-D.
E
Mohan Parasaran, Additional Solicitor General, A.K. Ganguli, Rajiv
Dutta, Sr. Advs., T.A. Khan, Rupesh Kumar, P. Parameswaran, B. Krishna
Prasad, Advs. with them for the Appellant.
Mis. Suresh A. Shroff & Co., (NP), V. Lakshmi Kumaran,
F
V. Balachandran and Rajesh Kumar for the Respondents.
The Judgment of the Court was delivered by
C.K. THAKKER, J. : These appeals are directed against a common
judgment and order dated December 19, 2000 passed by the Customs, Excise
and Gold (Control) Appellate Tribunal (hereinafter referred to as 'CEGAT').
By the said order, CEGA T disposed of five appeals filed by Mis. Pearl
Engineering Polymers Limited ('Company' for short) and by its Directors as
also by the Commissioner of Customs, New Delhi. CEGA T, by the order
impugned in the present appeals, allowed three appeals filed by the Company
G
H
A
B
c
D
E
F
G
H
394
SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.
and its two Directors and dismissed two appeals filed by the Commissioner
of Customs.
CEGA T set aside the Order in Original passed by the
Commissioner of Customs, New Delhi on December 30, 1997.
To appreciate the controversy raised in the present appeals, relevant
facts as noted in the Order in Original by the Commissioner of Customs may
be stated· in brief.
According to the Commissioner of Customs-appellant herein, Mis.
Pearl Engineering Polymers Limited ('Company') was registered under the
Companies Act, 1956. Mr. Chand Seth was the Chairman-cum-Managing
Director of the Company and Mr. Arun Gupta was whole time Director. The
Company was engaged in the manufacture of Polyester Chips (High Pressure
and Molding Grades) and other Polyethelene Terephthlate (PET) Bottle
Grade and Film Grade since 1995. For the purpose of the said products, the
Company set up a plant at Kurkumbh, District Pune in the State of
Maharashtra. The plant had been set up on the basis of the technical know
how.
For that the Company entered into a 'Know how' and 'Basic
Engineering Agreement' with Mis. Zimmer AG of Germany ('Zimmer' for
short) on May 4, 1993. The agreement was negotiated and signed by Mr.
Chand Seth and Mr. Arun Gupta. Both of them thus were aware of the terms
and conditions and contents of the agreement. The agreement was approved
by the Ministry of Industry and also by the Reserve Bank of India. The
primary object of the agreement was to acquire requisite know how for the
products of the company.
According to the Revenue, Intelligence was gathered by the Officers
of Directorate of Revenue Intelligence (DRI), Mumbai that the Company had
imported actual goods under the Export Promotional Capital Goods (EPCG)
Scheme at the concessional rate of duty and thereafter diverted some of the
goods in the local market. It thus appeared that the Company violated
conditions ofimport of capital goods under Para 14 of the "Export and Import
Policy, 1992-97" as the import of goods was subject to actual user condition
till the export obligation was completed. In view of the •ntelligence Report,
details of the import by Company urider EPCG Scheme were collected. As
per the details, the Company was issued licence Nos. (a) p/CG/2133135 dated
2.6.94, (b) p/CG/2133262 dated 9.7.94 and (c) P/CG/2133763 dated 30.12.94.
After scrutiny of import documents, licences were issued.
The goods
appeared to be imported in conformity with the items permitted under the
..
COMMR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONlCS LTD. [THAKKER, J.] 395
licences. The Company also submitted copies of Letter of Credit (L/C),
Equipments Supply Agreement between Zimmer and the Company and copy
of Proforma Invoice No. 1863 dated 4th May, 1993.
Physical inspection
of imported goods was also made by visiting the plant site. The plant was
in working condition and the capital goods indicated that there was no
divergence of capital goods under EPCG Scheme. On verification of EPCG
Scheme between Zimmer and the Company, it was noticed that the Company
had collected from Zimmer Know how, Basic Engineering Agreement and
Technical Assistance Agreement.
The Company had imported designs,
drawings and plans under the Know how and Basic Engineering Agreement
on which appropriate amount of customs duty had not been paid.
A show cause notice was, therefore, issued on November 16, 1996
to the Company, Mr. Chand Seth, Chairman-cum-Managing Director and Mr.
, Arun Gupta, whole time Director asking them to show cause as to why
custom duty amounting to Rs. 4, 18, 12,425 should not be demanded under
Section 28(1) of the Customs Act, 1962; an amount of Rs. 20,00,000
deposited by the Company voluntarily should not be adjusted against the duty
demanded; the goods i.e. drawings, designs, plans etc. imported in three
consignments having a total assessable value of Rs. 7,98,33,370 should not
be held liable to confiscation under Section 111 (m) of the Act and penalty
should not be imposed on each of them under Section 112 of the Act.
A
B
c
D
E
Mr. Chand Seth, Chairman-cum-Managing Director of the Company
replied to the show cause notice stating therein that he being the Chairmancum-Managing Director of the Company was not inv~lved in day-to-day
functioning of the Company which was taken care by Executives and other
employees of the Company.
As the Chairman-cum-Managing Director,
F
overall policy decisions were taken by him.
He was, hence, not liable to
penal action under Section 112 of the Act as he was not involved in the actual
import of drawings, designs, plans, etc.
Mr. Arun Gupta, Director of the Company, in his reply, contended that
Know how and FEEP were procured through courier after declaration to
G
Customs Authorities and one of the consignments was sought to be cleared
vide Bill of Entry dated December 28, 1993. While the classification in the
Bill of Ent1y was claimed under Chapter Heading 4906 and exemption under
Notification No. 36/93, the Customs Authorities were of the view that
Heading No. 4906 was not applicable. According to him, the books were
H
A
B
c
396
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
exempted from custom duty. He, therefore, refuted the custom's claim for
reassessment under Chapter Heading 4911. According to him, at any rate,
the entire value for the consignment which came under Air Way Bill was of
Rs. 63.11 lacs (approx) as per Invoice Nos. 1836-02A and 1836-92B dated
December 22, 1993 which could hot be taken as value of drawings for the
reason that the consideration was to be appropriated against several other
obligations of Zimmer under the agreement. The consignment came after
full declaration to the Custom Authorities and there was bona fide belief on
the part of the company that the drawings were fully exempted under Chapter
Heading 4906. At any rate, books were exempted under various notifications.
There was thus no intention to evade payment of custom duty. The plea taken
on valuation of drawings at DM 1,30,000 in the letter dated September 30,
1997 was without prejudice to the basic contention that the entire consignment
was exempted as 'books' and not liable to payment of duty. No penalty,
therefore, could be imposed either on the Company or on the officers.
D
Personal hearing was afforded to the Company on October 01, 1997.
E
F
G
Advocates for the Company appeared. Mr. Chand Seth, Chairman-cumManaging Director, Mr. Arun Gupta, Director and K. Srinivas, Consultant
contested the matter. Time was sought for filing written arguments which
was granted and written submissions were filed on 10th October, 1997 raising
several contentions on the basis of various clauses in the agreement and on
the merits of the matter. Reliance was also placed on certain decisions of
this Court as well as of CEGA T.
The main argument on behalf of the
Company was that the supply was of printed books which was covered by
Chapter Heading 49.01. Since they were exempted under Notification No.
107/'93-Cus dated March 30, 1993 and Notification No. 38/'94-Cus dated
March 1994, the Company was not at all liable to pay custom duty. The
Company also contended that the notifications were omnibus notifications
and even if goods were covered by Chapter Heading 49.06 or 49.11, full
exemption was granted. Thus, notwithstanding the fact that FEEP could be
classified under Chapter Heading 49. l l, in view of they being "Book" were
covered by Exemption Notifications and there was no liability of the
Company to pay custom duty. Reference was also made to HSN notes and
it was submitted that Drawings, Designs and Plans could be classified as
Printed Books by virtue of Interpretation Rules of 1988. The entire FEEP,
therefore, could be exempted and there was no substance in the allegation
of the department that the Company was liable to pay custom duty.
H
Objections were also raised as to limitation and on valuation.
)
COMMR. OF CUSTOMS 1·. GUJ_ARAT P£RSTORP ELECTRONICS LTD. [THAKKER, J.J 397
The case of the department, on the other hand, was that PEEP and
Drawings, Designs and Plans ought to be classified under Chapter Heading
49.11. As they could neither be covered by 4911.10 (Trade Advertising
Material, Commercial Catalogues and the like) nor by 4911.11 (Pictures,
Designs and Photographs), the relevant entry was sub-heading 4911.99
(Others) and was liable to pay customs duty at 25%.
The Commissioner of Customs considered the averments of the
department and the reply submitted by the Company and by Mr. Gupta.
According to the Commissioner, an agreement was entered into between
Zimmer and the Company and the said fact was admitted by the Company.
A
B
In consideration of supply of PEEP, an amount of BM 34,00,000 equivalent
C
to Rs. 7,98,33,370 was to be paid by the Company to Zimmer. Out of the
said amount, DM 26,00,000 was to be paid for FEEP and DM 8,00,000 was
for Know how. Considering the decisions cited before him, the Commissioner
held that the goods imported under Know how pertained to processes and
were in the shape of manuals, brochures or leaflets.
According to him,
printed books and manuals both were classified under sub-heading 4901.99
but were distinguishable. Exemption Notifications referred by the Company
applied to Printed Books under Chapter Heading 49 but did not apply to the
goods in question. He, therefore, held that the technical documents imported
by the Company as part of Know how were not 'Books' but were manuals/
brochures classifiable under Chapter sub-heading 4901.99 and were not
exempted under the Exemption Notifications. The Company was, therefore,
liable to pay duty thereon.
Accordingly, the following order was passed :
ORDER
"54. In view of the findings hereinabove:-
a)
I confirm duty demand of Rs. 4,18,12,425.
b)
I order adjustment of the amount of Rs. 30 lakhs deposited by
Mis. Pearl Engineering Polymer Ltd., voluntarily, towards the above
confirmed demand of duty and direct that the remaining amount be
paid forthwith.
D
E
F
G
c)
I hold that the goods are liable to confiscation under Section
H
A
B
c
D
E
398
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
11 l(m) of the Customs Act, 1962. However, since the goods are
not available, I refrain from ordering confiscation.
d)
I impose under Section 112 of the Customs Act, 1962 a penalty
of Rs. I crore (Rupee one crore) on Mis. Pearl Engineering Polymer
Ltd.,
e)
I impose penalty of Rs. 50 lakhs (Rupees fifty lakhs) on Shri
Chand Seth, Chairman-cum-Managing Director of Mis. Pearl
Engineering Polymer Ltd., under Section 112 of the Customs Act.
f)
I also impose a penalty of Rs. 25 lakhs (Rupees twenty five
lakhs) on Shri Arun Gupta, Director of Mis. Pearl Engineering
Polymers Ltd., under Section 112 of the Customs Act, 1'962.
55. The penalties shall be paid forthwith."
Being aggrieved by the Order in Original passed by the Commissioner
of Customs, five appeals came to be registered before CEGA T. One appeal
was preferred by the Company against the decision of the Commissioner
holding that the goods were liable to payment of custom duty and not covered
by Chapter Heading 4901. Two appeals were filed by Mr. Chand Seth,
Chairman-cum-Managing Director and Mr. Arun Gupta, Director against
payment of penalty of Rs. 50,00,000 and Rs. 25,00,000 respectively. Two
cross appeals were filed by the Department against quantum of penalty
imposed on Mr. Chand Seth and Mr. Arun Gupta contending that the penalty
F
imposed by the Commissioner of Customs was inadequate and was required
to be enhanced.
G
CEGA T took up for consideration all the appeals. It observed that an
identical question come for consideration before a Larger Bench of CEGA T
in Parasrampuria Synthetics Ltd v. Commissioner of Customs, New Delhi,
(2000) 119 ELT 211 : (2000) 38 RL T 846 (LB). It noted that the Larger
Bench was faced with the issue as to whether the law laid down by a twomember Bench in Tractors & Farm Equipment Ltd. v. Collector of Customs,
( 1993) 68 EL T 234 was correct or decisions of Coordinate Benches in
Mitutronics v. Collector of Customs, (1990) 46 ELT 500, Rota Inks (P) Ltd.
H
v. Collector of Customs, (1990) 47 ELT 398, Tata Consultancy Service v.
·.
...
COMJ\.fR. OF CUSTOMS 1•. GUJARAT PERSTORP ELECTRONICS LTD. [THAKK.ER, J.J 399
Collector of Customs, (1991) 53 ELT 454, Collector of Customs, Madras.v.
A
Tata Elxsi India Ltd., (1995) 78 ELT 370, Lakshmi Cement v. Collector of
Customs, New Delhi, (1996) 84 ELT 271, were correct. CEGAT proceeded
to state that after a survey on the entire case law, the Larger Bench in
Parasrampuria Synthetics Ltd took the view that the law laid down by twomember Bench in Tractors & Farm Equipment Ltd did not lay down correct B
law and accordingly overruled it. The decisions in other cases were correct
and the said view was affirmed. In those decisions, it was held that printed
materials could be said to be "Books" covered under Chapter Heading 4901
and were entitled to full exemption and consequently no duty was leviable
on the goods imported. CEGAT noted that the decision of the Larger Bench
was binding on it. Accordingly, the appeals filed by the Company as well
C
as by the Chairman-cum-Managing Director and the Director were allowed
by setting aside the order passed by the Commissioner imposing duty and
penalty. Resultantly, two appeals filed by the Department for enhancement
of penalty on Chairman-cum-Managing Director and Director were dismissed.
Against the order passed by CEGAT, the department has filed these
appeals. One of the appeals came up for preliminary hearing before a three
Judge Bench on December 14, 2001. Delay was condoned and appeal was
admitted. Notice was also issued for interim relief. In the meantime, stay
was granted against refund of amount if not already refunded. The interim
order was thereafter continued and hearing was expedited. On May 01, 2003,
the appeals were placed for hearing before a two Judge Bench and the
following order was passed :
"Heard the learned counsel for the parties.
Learned counsel for the appellant submits that the question involved
in these appeals is covered by the decision rendered by this Court
in Commissioner of Customs, New Delhi v. Parasrampuria Synthetics
Ltd., (2001) 9 SCC 74 which reveals that the tribunal's judgment
on which the reliance was placed was set aside. As against this, Dr.
A.M. Singhvi, learned senior counsel appearing on behalf of the
respondent relied upon the decision rendered by this Court in A.C.C.
v. Commercial Tax Officer, [2001] 4 SCC 593.
D
E
F
G
Considering the aforesaid two decisions, there appears some
conflict in the ratio laid down in both the cases.
Hence, these
H
A
B
c
D
E
F
G
H
400
SUPREME COURT REPORTS (200~] SUPP. 2 S.C.R.
appeals are referred to a larger Bench.
Registry to place the papers before Hon'ble the Chief Justice
of India for appropriate direction in this regard to placl! it before an
appropriate Bench."
That is how the matters were placed before us for final hearing. We
have heard learned counsel for the parties.
At the time of hearing of appeals, the learned counsel for
the appellant stated that three questions arise for consideration of this
Court:
(i) Whether the goods imported by the Company in the form FEEP
(Front End Eng!neering Package) comprising of technical
documentation, designs and drawings are classifiable under Chapter
sub-heading 4911.99 of the Customs Tariff?
(ii) Whether the goods imported by the appellant in the form of
know-how containing latest up-to-date technical data and information
including secret technical knowledge relating to the processes and
their employment to the design, operation and maintenance of the
plant, are classifiable under Chapter sub-heading 4901.99 of the
Customs Tariff?
(iii) Whether goods, as described in (a) & (b) above, can be
considered as "Printed Book" classifiable under Chapter 49 of the
Customs Tariff in order to avail the benefit of Notification Nos. l 07 I
93-Cus and 38/94-Cus?"
It was urged that CEGAT had allowed appeals filed by the Company,
Chairman-cum-Managing Director and Director and dismissed the appeals
filed by the Department solely on the ground that the point was covered by
a Larger Bench decision of CEGA T in Parasrampuria Synthetics Ltd
It
was submitted that the decision of the Larger Bench of CEGA T in
Parasrampuria Synth"!tics Ltd was challenged by the Department in this
Court and this Court in Commissioner of Customs, New Delhi v. Parasrampuria
Synthetics Ltd, (2001] 9 SCC 74 :,(;WOl) 133 ELT 9 (SC), set it aside
allow.ing the appeal filed by the Department. Since the decision of the Larger
I
COMMR. OF CUSTOMS I'. GUJARAT PERSTORP ELECTRONICS LTD_ [THAKKER,J.J 40}
Bench of CEGA T cannot be said to be a good law in view of the decision
A
of this Court referred to above, all the appeals deserve to be allowed by
setting aside the order passed by CEGA T.
The learned counsel for the respondent-Company, on the other hand,
submitted that the view taken by Larger Bench of CEGA T in Parasrampuria
B
Synthetics ltd was correct and in accordance with law. It, therefore, could
not have been interfered with by this Court as has been done in an appeal
against the decision and the decision of this Court in Con1n1issioner of
Customs, New Delhi v. Parasrampuria Synthetics "ltd does not lay down
correct law and deserves to be overruled. It was also submitted that in-that
case, this Court did not consider in their proper perspective several decisions
C
particularly decisions in Commissioner of /ncon1e Tax, Gujarat v. £/econ
Engineering Company ltd, (1974) 96 ITR 672 (Guj) and of this Court in
Scientific Engineering House Ltd v. CIT, [ 1986] I SCC 11. It was submitted
that though the point was directly covered by an earlier decision of this Court,
a two Judge Bench attempted to distinguish the said case and came to
incorrect conclusion. It was also submitted that earlier when these appeals
were glaced for hearing, a two Judge Bench was prima facie satisfied that
Parasran1puria Synthetics ltd. was not correctly decided and hence the
matter was referred to a three Judge Bench. It was, therefore, submitted that
the appeals deserv~ to be dismissed by confirming the order passed by
CEGAT.
D
E
Jn the akemative, it was s~bmitted that since CEGAT allowed the
appeals filed by the Company, Chairman-cum-Managing Director and Director
relying upon a Larger Bench decision in Parasra111puria Synthetics Ltd.
holding that the goods imported by it could be said to be "Books" and hence
p
were exempted from payment of excise duty, other points though argued and
pressed into service at the time of hearing were not considered.
It was,
therefore, submitted that in case this Court holds that the contention raised
by the D'epartment is well founded and the order passed by CEGA Tare liable
to be set aside, the matters may be remitted to CEGA T directing it to consider
all the point~ and to decide them in accordance with law.
G
The question for consideration before us is whether the goods and
materials imported by the Company in the form of FEEP com prising of
Equipments, Drawings, Designs and Plans are classifiable under Chapter
Heading 49.0I or 49.06 of Schedule I of the Customs Tariff Act, I 975 and
H.
.. ~
'•.
402
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A
the Company is entitled to the benefit under notification Nos. 107 /93-Cus and
38/94-Cus or they are classifiable under Chapter Heading 4911.99 as
contended by the department.
B
c
D
E
F
G
H\,'
Before we deal with the actual question, it way be appropriate to refer
to the relevant provisions of law. Section 2 of the Customs Tariff Act, 1975
declares the rates at which the custom duty is levied under the Customs Act,
1962 as specified in the First and the Second Schedule to the Act. .Chapter
49 of Schedule I deals with "Printed books, newspapers, pictures and other
products of the printing industry, manuscripts, typescripts and plans and reads
as under:
CHAPTER 49
Printed books, newspapers, pictures and other products of the
printing industry; manuscripts, typescripts and plans
Notes:
2.
. 3.
4.
Heading No. 49.01 also covers:
(a) A collection of printed reproductions of, for example,
works of art or drawings, with a relative text, put up with
numbered pages in a form suitable for binding into one
or more volumes;
(b) A pictorial supplement accompanying, and subsidiary
to, a bound volume; and
(c) Printed parts· of books or booklets, in the form of
assembled or separate sheets or signatures, constituting
the whole or apart of a complete work and designed for
binding.
5.
I
..
..
COMMR. OF CUSTOMS •«GUJARAT PERSTORP ELECTRONICS LTD. [THAKKER, J.] 403
6.
A
The relevant headings and sub-headings read thus :
"49.01
Printed books, brochures, leaflets and similar printed
matter, whether or not in single sheets
B
4901.10 In single sheets, whether or
not folded
25%
4901.91 Dictionaries and encyclopedias,
and serial instaments thereof
25%
c
4901.99 Other
25%
49.06
4906.00 Plans and drawings for architectural,
engineering, industrial, commercial,
topographical or similar purposes,
D
being originals drawn by hand; hand-written
texts photographic reproductions on
sensitized paper and carbon copies of the
foregoing
25%
49.11
Other printed matters, including printed
E
pictures and photographs
49.11.10
Trade advertising material, commercial
catalogues and the like
25%
4911.91
Pictures, designs and photographs
25%
F
4911.99
Other
25%
The relevant notifications are notification Nos. I 07 /93-Cus., dated
March 30, 1993 and 38/94-Cus; dated March l, 1994. The relevant part of G
notification No. 107/93-Cus reads as follows;
"Exemption to specified goods of Chapters 49 and 97
In exercise of the powers conferred by sub-section (\) of
section 25 of the Customs Act, 1962 (52 of 1962)
and in
H
404
A
B
c
S.No.
1.
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
supersession of the notification of the Government of India in the
Ministry of finance (Department of Revenue) No. 36/93 -
Customs,
dated the 28th February, 1993, the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby
exempts goods specified in column (3) of the Table hereto annexed
and falling within the Chapter or under the heading No. of the First
Schedule to the Customs Tariff Act, 1975 (51 of 1975), as specified
in the corresponding entry in column (2) of the said Table, when
imported into India, from the whole of the duty of customs leviable
thereon which is specified in the said First Schedule.
TABLE
Chapter of Heading No.
Description of Goods
49
Printed books (including covers for printed books)
D
2.
49.02 Periodicals (including newspapers).
3.
49.04 Music manuscripts.
4.
49.05 Maps.
E
5.
49.05 Charts
6.
49. 06 Plans, drawings and designs
7.
97.04 Postage stamps, used or if unused not of current or new
issue in the country to which they are destined.
F
8.
97.05 Metals
[Notification No. 107/93-Cus., dated 30.3.1993]
The other notification is notification No. 38/94-Cus., 1st March, 1994.
G
It is "General Exemption No. 193B". The relevant part thereof reads as
under:
H
"Effective rates for specified goods falling within Chapters 40, 41,
43, 44, 47, 48, 49 and 97
In exercise of the powers conferred by sub-section (1) of section 25
' •
..
COMMR. OF CUSTOMS r. GUJARAT PERSTORP ELECTRONICS LID. [THAKKER, JJ 405
S.No.
of the Customs Act, 1962 (52 of 1962), the Central Government,
A
being satisfied that it is necessary in the public interest so to do,
hereby exempts goods of the description specified in column (3) of
the Table hereto annexed, and falling within Chapters, heading Nos.
or sub-heading Nos. of the First Schedule to the Customs Tariff Act,
1975 (51 of 1975) as are specified in the corresponding entry in
B
column (2) of the said Table, when imported into India, !Tom so
much of the duty of customs leviable thereon which is specified in
the said First Schedule, as is in excess of the amount calculated at
the rate specified in the corresponding entry in column (4) of the
said Table, subject to the conditions, if any, laid down in the
corresponding entry in column (5) of the said Table.
Chapter/heading No.
Sub-heading No.
Description of Rate
goods
Condition
c
I. -
I I
D
12.
49
Printed books (including
covers for printed books)
Nil
13. -
19
E
[Notification No. 38/94-Cus., dated 1.3.1994]
Notification No. 25/95Cus. dated 16th March, 1995 is also important.
The relevant part of which reads thus;
"19. EFFECTIVE RA TES OF DUTY FOR GOODS OF VARIOUS
F
CHAPTERS/HEADINGS
GENERAL EXEMPTION NO. 121
Effective rates of duty for specified goods of Chapters 40, 41,
44, 47, 48 and 49. In exercise of the powers conferred by subsection (I) of Section 25 of the Customs Act, 1962 (52 of 1962),
the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts goods specified in column
(3) of the Table hereto annexed, and falling within Chapter, heading
G
No. or sub-heading No. of the First Schedule to the Customs Tariff H
A
B
406
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
Act, 1975 (51 of 1975) as are specified in the corresponding entry
in column (2) of the said Table, when imported into India, from so
much of the duty of customs leviable thereon which is specified in
the said First Schedule, as is in excess of the amount calculated at
the rate specified in the corresponding entry in column (4) of the
said Table, subject to the condition, if any laid down in the
corresponding entry in column (5) of the said Table.
S.No.
Chapter or heading
No. of sub heading No. goods
Description of
Rate
Conditions
c
9.
D
E.
F
G
H
10.
49.
Printed books (including covers
far printed books) and printed
manuals including those in
loose-leaf form with binder)
NIL
11 -
16
It is also appropriate at this stage to refer to Harmonized System· of
Nomenclature (HSN). The relevant part reads thus;
"49.01 - PRINTED BOOKS, BROCHURES, LEAFLETS AND
SIMILAR PRINTED MATTER, WHETHER OR NOT IN SINGLE
SHEETS.
4901.10
In single sheets, whether or not folded
Other
4901.91
Dictionaries and encyclopedias, and
serial instalments thereof
4901.99
Other
This heading covers virtually all publications and printed reading
~atter, illustrated or not with the exception of publicity matter and
products more specifically covered by other headings of the chapter
(particularly) heading 49.02, 49.03 or 49.95. It includes:
_,
'
COMMR. OF CUSTOMS r. GUJARAT PERSTORP ELECTRONICS LID. (TIIAKKER, J.] 407
(A) Books and booklets consisting essentially of textual matter of A
any kind and printed in any language or characters, including
Braille or shorthand. They include literary works of all kinds,
text books and technical publications: books of reference such
as dictionaries, encyclopaedias and directories; catalogues for
museums and public libraries (but not trade catalogues);
B
liturgical books such as prayer books and hymn books (other
than music hymn books of heading 49.04); children's books
(other than children's picture, drawing or colour'ng books of
heading 49.03). Such books may be bound (in paper or with
soft or stiff covers) in one or more volumes, or may be in the
form of printed sheets comprising the whole or a part of the
C
complete work and designed for binding.
Dust covers, clasps1 book-marks and other minor accessories supplied
with the books are regarded as forming part of the book.
(B) Brochures, pamphlets and leaflets, whether consisting
of several sheets of reading matter fastened together
(e.g., stapled), or of unfastened sheets, or even of single sheets.
These include publications such as : shorter scientific theses
and
monographs~ instruction notices, etc., issued
D
by government departments or othf" bodies, tracts, hymn
E
sheets. Etc.
(C) Textual matter in the form of sheets for binding in loose
leaf binders.
The heading also covers :
(\) Newspapers, journals and periodicals bound otherwise than in
paper, and sets of newspapers, journals or periodicals comprising
more than one number under a single cover, whether or not
containing advertising material.
(2)
Bound picture books (other than children's picture books
of heading 49.03).
(3)
A collection of printed reproductions of works ofart, drawings,
F
G
etc.