S. Venkatesan, Senior Vice-President

1. This appeal is against the order dated 21-8-82 (issued on 11/14-10-82) of the Additional Collector of Customs, Bombay in which he confiscated the consignment of steel bars imported by the appellants, subject to a fine of Rs, 1,00,000/- in lieu of confiscation. This was in consequence of having held that at the relevant time such goods were canalised and should have been imported through the concerned canalising agency, viz. SAIL and not directly by the importers as they had done.

2. Appearing before us for the appellants, Shri D.N. Mehta submitted that the appellants were manufacturers of engine valves from about 1965 onwards. For this purpose, they had to import alloy steel of a particular composition. They were regularly issued import licences for this purpose. The steel which they imported had chromium content of about 20.6% According to the 1S1 Specification for steel for valves for Internal Combustion Engines (IS : 7494 : 1981) the steel to be used had to contain 20 to 20% chromium

3. Action has been taken against the appellants on the ground that the steel imported by them was stainless steel. According to IS Standard Glossary of terms relating to Iron Steel. [IS : 1956 (Part I)-1976] Stainless Steel was defined as an alloy steel containing about 12 per cent or over of chromium with or without nickel together with other elements, and characterized by its high resistance to corrosive media. Therefore, according to the ISI, an alloy steel containing over 12% chromium would be stainless steel, and equally alloy steel required for the manufacture of engine valves would be stainless steel. In other words, the material which they had been importing for the last several years was stainless steel as defined by the I.S.I. Nevertheless they had been getting licences specifically for the manufacture of the end product "Engine Valves", in which the description was "Iron and Steel items and Ferro Alloys". No objection had been raised by the department on the ground that the material was stainless steel until 1981 when such a consignment was imported by them. On that occasion, a question was raised whether the material should have been obtained through SAIL as it was stainless steel and therefore canalised. However, the Customs authorities ultimately withdrew their objection and not only allowed release of the consignment but also issued a detention certificate. It was the appellants' understanding that a reference had been made on that occasion to SAIL, who confirmed that the material was not to be treated as canalised.

4. The present case related to an importation made in August 1982 against two import licences issued for periods prior to 1982-83 and subsequently revalidated. At the time of revalidation an endorsement had been added that import of banned and canalised items would not be allowed during the revalidated period. Appendix 8 of the ITC policy for 1982-83 contained a list of canalised goods, one of which was bars etc. of stainless/heat resisting steel. This was not a new provision and there was a similar provision in the ITC policy relating to previous licensing periods. However, the ITC policy for 1982-83 for the first time incorporated a specific definition of stainless steel. This was in para 219(v), where it was laid down that any steel containing over 12% of chromium would be considered as stainless/heat resisting steel. It was because of this newly-introduced definition that the customs authorities took objection to the import of the consignment of steel under consideration. Shri Mehta emphasised that although this definition appeared for the first time in the ITC policy for 1982-83, such a definition had been implicitly in force all along. It was to be found in other authoritative publications such as the ISI specifications to which we have referred earlier. If the material imported, which was technically stainless steel, was not considered as liable for objection during th