1998 Supreme(SC) 650

1998(5) Supreme 447
Supreme Court of India
(From Customs Excise & Gold (Control) Appellate Tribunal, New Delhi)
S.C. Agrawal & G.T. Nanavati, JJ.
M/s. Northern Plastic Ltd. etc. -Appellants
versus
Collector Customs & Central Excise, etc. -Respondents
Civil Appeal No. 4196 of 1989
With
Civil Appeal No. 3325 of 1990
Decided on 14-7-1998
Counsel for the Parties :
For the Appellant/Assessee : Dushyant A. Dave, Sr. Advocate, Parag P. Tripathi, A.T. Patra, (Gautam Khaitan), Advocate for M/s. Khaitan & Co., Advocates.
For the Revenue/Respondent : M. Gauri Shanker Murthy, V.K. Verma, P. Parmeswaran, Advocates.
For the Applicant in I.A. No. 2 : S.K. Mehta, Advocate.

Important Points
1. Cinematographic Colour Films (Unexposed) is covered by Customs Tariff Heading 3702.41 and the Central Excise Tariff Heading 3702.20 as Photographic Colour Films (Unexposed) includes Cinematographic Colour Films (Unexposed).
2. Import of Photographic Colour Films (unexposed) and described as Cinematographic Colour Films (Unexposed) Positive in Bill of Entry by importer does not amount to misdeclaration u/s. 111(m) of Customs Act, 1962.
3. Unless the Scheduled Industry is carried on in a factory as defined by the Industrial Development and Regulation Act, the importer engaged in industrial acti­vity is not required to take out a licence even though the industry is an undertaking pertaining to a Scheduled Industry.

Headnote:(i) Customs Act, 1962-Sec­tions 111(d) & (m) and 112(a)(i)-Custom duty and countervailing duty - Exemption under Notifications-Benefit of-Import of Photographic Colour Films (Unexposed) but described as Cinemato­graphic Colour Films (Unexposed) Positive in Bill of Entry by import­er-Used as Cinematographic Colour Films (Un­exposed) Positive by making it ready for use on a projector or a camera through process of slitting, cutting and perforation-Covered by heading 37.02 in ab­sence of any separate heading or sub-heading in respect of Cinemato­graphic Colour Films (Unexposed)-Films imported by importer without sprocket holes and exceeding width of 610mm and length of 200m - Is classifiable under heading 3702.41 and 3702.20-Description and classification of Photographic Films as Cinemato­graphic Films-Does not amount to mis­declaration under Section 111(m)-Claim of assessee in Bill of Entry regarding exemption under Notification No. 52/86-Cus as amended by Notification No. 157/88-Cus and under Notification No. 50/88-C.Ex. - Does not also amount to misdeclaration on ground that declaration made in Bill of Entry does not correspond with any other particular of import­ed goods because claim for being entitled to exemption u/said notifi­cations is matter of belief of importer and a matter of ‘any other particular’ w.r.t. goods-Finding of Collector and CEGAT that importer intentionally tried to evade proper payment of customs duty and coun­tervailing duty by claiming benefit of exemption notifications found not applicable to imported goods-Erroneous and misconceived.

       Held : The appellant had imported goods in January, 1989 and the Bill of Entry and related necessary documents were produced by the appellant before the Customs authorities at Kandla sometime between 11.1.1989 and 19.11.1989. Therefore, Chapter 37 of the Customs Tariff for the year 1988-89 was applicable. Chapter 37 dealt with Photographic or Cinemat­ographic goods. It divided those goods under several heads and various sub-heads. Heading No. 37.02 was in respect of “Photographic Film in rolls, sensitised, unexposed, or any material other than paper, paper board or textils, instant print Film in Rolls, sensitised, Unedxposed”. If the width of the roll of `Photographic Colour Film’ exceeded 610mm and the length exceeded 200m then such goods were included under sub-heading No. 3702.41. In the explanatory notes to HSN in Chapter 37, while explaining the heading `Photographic Films in Rolls (Unex­posed)’ falling under heading 37.02 it was stated that the heading `Photo­graphic Films in Rolls’ included Cinematographic Film, normal width of which is 35, 16, 9.5 or 8 mm. It was also stated by way of an explana­tion that Photographic Films not cut to useable sizes remained classi­fiable under the same heading. In the whole Chapter Cinematographic Films (Unexposed) in Rolls were not shown separately under a different heading except heading No. 37.06 which was in respect of Cinemato­graphic Film, `Exposed and Developed’. In this case we are concerned with Cinematographic Films (Unexposed). Therefore, whether the import­ed goods were Photographic Films in Rolls or Cinematographic Films in Rolls they were covered by heading No. 37.02 and as the width and length of the said rolls exceeded 610 mm and 200 m respectively they had to be classified under sub-heading No. 3702.41. There was no heading or sub-heading in Chapter 37 which could have covered the imported goods. Moreover, the term ‘Photo­graphic Film’ is wider than the term `Cinematographic Film’ and, therefore, would include within its meaning Cinematographic Films also. The difference between the two lies in this that a Cinematographic Film is one which is slitted and perforated and thus made ready for use on a projector or a camera. Yet there was no separate heading or sub-heading in respect of Cinemato­graphic Film (Unexposed). When all this is considered along with the explanatory notes to HSN of Chapter 37 it becomes apparent that Cine­matographic Film, the normal width of which used to be 35, 16, 9.5 or 8 mm, was not considered as a separate item and Photographic Films in Rolls useable as Cinematographic Films (ready) were treated almost as inter­changeable terms. Neither the customs tariff nor the central excise tariff for the years 1988-89 indicated that the term `Cinemato­graphic Films’ was intended to mean `Photographic Film’ made ready by slitting, cutting and perforation (i.e. mak­ing sprocket holes), for use on a projector or a camera. (Para 17)

       Further held : The only reason why the Collector of Customs and CEGAT held that the classification of the goods was misdeclared was that they were Photographic Film in Rolls and not Cinematographic Films in Rolls as they could not have been straightaway put on a projector or a camera and for making them ready for that purpose it was necessary to subject them to the process of slitting, cutting and perforation. This reason­ing of the Collector and CEGAT is clearly erroneous and misconceived. The charge of misdeclaration of goods was based upon Section 111(m) of the Customs Act. According to the said provision the goods brought from a place outside India are liable to confiscation if the goods “do not correspond in respect of value or in any other particular with the entry made under this Act”. Therefore, if the description of the imported goods given to the customs authorities does not correspond in respect of value or in any other particular including its description as mentioned in the Entry made under the Act, then only they can be said to have been misdeclared and, therefore, liable to confiscation. The word “Entry” in the context of the facts of this case meant an Entry made in the Bill of Entry. Therefore, before holding that the goods were misdeclared the authorities were required to come to the conclusion that the imported goods did not correspond in respect of value or in any other particular with the description and the value of the goods as stated in the Bill of Entry. In the Bill of Entry the imported goods were described as Cinematographic Colour Films (Unex­posed) Positive. The size of the goods was also mentioned in the Bill of Entry. There was no dispute in respect of correct valuation of the goods or any other particular except its description as Cinematograph­ic Colour Films. Since the proceedings were initiated for the purpose of confiscation the burden was on the Department to show that the goods imported were not Cinematographic Colour Films but were Photo­graphic Colour Films only. We have already referred to the scheme and the relevant heading and sub-headings of Chapter 37 of the Customs Tariff for the year 1988-89 and observed that there was no separate heading or sub-headings in respect of Cinematographic Colour Films (Unexposed). Whether the film was Photographic Film (Unexposed) or Cinematographic Film (Unexposed), it was included under the heading 37.02. Whether with sprocket holes or without sprocket holes they were all described as Photographic Film in Rolls and there was no separate heading or sub-heading in respect of Cinematographic Films having sprocket holes and of width not exceeding 105 mm. Therefore, the scheme of Chapter 37 did not disclose that only those Photographic Films in Rolls (Unexposed) could legitimately be described as Cinemat­ographic Films if they were slitted into a width not exceeding 105 mm and had sprocket holes. Thus for the purpose of being included under heading 37.02 it was not necessary that the film should have been cut to useable sizes or should have been of a particular width only. All Photographic Films, including Cinematographic Films with or without sprocket holes and having normal width of Cinematographic Film or otherwise were covered by heading 37.02 and since the film imported by the appellant was without sprocket holes and exceeded width of 610 mm and length of 200 m, it was correctly classifiable under 3702.41 only. It is, therefore, difficult to appreciate how for the purpose of the Customs Act and for payment of customs duty the goods cannot be said to have been correctly classified. The goods which were imported by the appellant were Photographic Colour Films (Unexposed) and they were meant for being used as Cinematographic Films. The appellant was engaged in the activity of using such films as raw material for making it ready for use as Cinematographic Film by subjecting the said raw material to the process of slitting, cutting and perforation or making of sprocket holes. It was not even suggested by the customs authorities that the imported goods were ordinarily used for or intended to be used for any other purpose. Therefore, even though the imported goods were not ready for being used as Cinematographic Films in the sense that they could be straightaway put on a projector or a camera, the appellant cannot be said to have misdeclared them by describing and classifying them as Cinematographic Colour Films (Unexposed).

       The second ground on which it was held that the imported goods were misdeclared was that the appellant had wrongly stated in the Bill of Entry that it was entitled to the benefit of exemption notification No. 52/86-cus as amended by notification No. 157/88-cus. and notifica­tion No. 50/88-C.Ex. In the Bill of Entry and other related documents the appellant had given specific and clear description of the goods as can be seen from the following extract from the Bill of Entry:

       “Cinematographic Colour Films (Unexposed) Positive.

       Size :

       Length 1250 mtrs. x width 1140 mm.

       (Useable length 1250 m x width 1085 mm.)

       Total Linear Metres:

       59 Rolls x 1250 m = 73,750 mtrs.

       Total sq.m. 1250 x 1140 x 59 = 84075.”

       The appellant had not described the rolls as jumbo rolls but had given the length and width of each roll. The word “jumbo” is only indicative of size of the goods and the appellant having specifically stated the size of each roll it was not necessary, as there was no such requirement of law, for him to have described the goods which were in the form of rolls as jumbo rolls. It was also not necessary for him to describe them as the `jumbo colour film’ as there was no separate heading or sub-heading for jumbo colour film in Chapter 37. Merely because the appellant claimed that it was entitled to exemp­tions in respect of customs duty under exemption notification No. 52/86 as amended by 157/88 and because there was a separate exemption notification in respect of colour jumbo films, it cannot be said that the declaration made in the Bill of Entry did not correspond with “any other particular” of the imported goods. Whether the appellant was entitled to the benefit of exemption under the said notification or not was a matter of belief of the appellant and not a matter of `any other particular’ with respect to the goods. It is also relevant to note that the appellant’s earlier consignment bearing the same de­scription, same classification and identical claim for exemptions was cleared by the Delhi Customs House in the previous year. The Collector and CEGAT were, therefore, clearly in error in holding that by claim­ing benefit of exemptions under notifications which really did not apply to the imported goods, the appellant had intentionally tried to evade proper payment of customs duty.

       For the purpose of claiming benefit of exemption in respect of countervailing duty, the appellant had stated in the Bill of Entry that the goods imported by it were covered by the heading 3702 and by the sub-heading 3702.20 of Chapter 37 of the Central Excise Tariff and that it was entitled to the exemption to the extent provided under notification No. 50/88-C.Ex. Under Central Excise Tariff for the year 1988-89 also Chapter 37 dealt with Photographic or Cinematographic goods. The relevant heading in respect of Photographic Film in Rolls was 37.02 and it read as under:-

       “Photographic Film in Rolls, sensitised unexposed of any material other than paper, paper board or textiles; ­instant print Film in Rolls, sensitised, Unexposed.”

       Photographic Film in Rolls (Unexposed) were covered by heading 37.02. If it was meant for X-Ray then the proper sub-heading for it was 3702.10. Cinematographic Film (Unexposed) were covered by sub-heading 3702.20 and for other types of Photographic Films in Rolls the proper heading was 3702.90.

       As the goods imported by the appellant were being used and intended to be used as Cinematographic Film, the appellant had described them a Cinematographic Films covered by sub-heading 3702.20. No attempt was made by the customs authorities either before the Collector or before CEGAT to show that the goods imported by the appellant were ordinarily not used as Cinematographical Films or were not intended by the appel­lant for such a use. Moreover, looking to the heading 3702 and its sub-heading, it does not appear that such goods were intended to be covered by sub-heading 3702.90. As regards the claim for exemption in payment of countervailing duty the appellant had stated that it was entitled to the benefit under notification No. 50/88-C.Ex. This declaration made by the appellant has been found to be wrong by the Collector and CEGAT on the ground that there was a separate exemption notification in respect of jumbo rolls for Cinematographic Films. While dealing with such a claim in respect of payment of customs duty we have already observed that the declaration was in the nature of a claim made on the basis of the belief entertained by the appellant and therefore, cannot be said to be a misdeclaration as contemplated by Section 111(m) of the Customs Act. As the appellant had given full and correct particu­lars as regards the nature and size of the goods, it is difficult to believe that it had referred to the wrong exemption notification with any dishonest intention of evading proper payment of countervailing duty. (Paras 18 to 23)

       Consequently held : We, therefore, hold that the appellant had not misdeclared the imported goods either by making a wrong declaration as regards the classification of the goods or by claiming benefit of the exemption notifications which have been found not applicable to the imported goods. We are also of the view that the declarations in the Bill of Entry were not made with any dishonest intention of evading payment of customs and countervailing duty. (Para 24)

       (ii) Customs Act, 1962-Section 111(d) & (m)-Confiscation of imported goods-Importer, a small scale industrial undertaking registered with Director of Industries, engaged in conversion/cutting of jumbo rolls into Cinematographic Colour Films (Unexposed) Positive -It is an industrial undertaking engaged in industrial activity pertaining to Scheduled Industry-How­ever, such industry not carried on in a factory as defined under provisions of Industrial Development & Regulation Act-Hence, licence required under IDRA-Not necessary -Importer having certificate of registration issued by competent authority-Is an actual user (indus­trial) eligible to import goods under Open General Licence (OGL)-Confiscation of goods imported under OGL by importer-Unlawful. (Paras 25, 26 & 27)