Import policy interpretation favoured separate treatment of non-interchangeable spares and barred confiscation fine without deliberate breach.

Under the 1978-79 Import Policy, tailor-made mechanical seals that differed in size, specification and code, and were not interchangeable, could be treated as separate spares for the prescribed value limit rather than clubbed as one unit; the classification was decided in favour of the assessee. The Court also held that where the importer made full disclosure, acted bona fide, and there was no deliberate contravention, fine in lieu of confiscation was not warranted; penal consequences were therefore set aside. The principle applied was that, where two constructions are reasonably open, the interpretation beneficial to the importer should be adopted.

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Issues: (i) Whether each type and size of mechanical seal imported under para 54B(iii) of the Import Policy of 1978-79 was to be treated as a separate non-permissible spare for the purpose of the Rs. 50,000 limit; (ii) Whether fine in lieu of confiscation could be imposed when the importer had disclosed the goods fully and there was no deliberate contravention.

Issue (i): Whether each type and size of mechanical seal imported under para 54B(iii) of the Import Policy of 1978-79 was to be treated as a separate non-permissible spare for the purpose of the Rs. 50,000 limit.

Analysis: The expression in para 54B(iii) that a single non-permissible spare should not exceed the prescribed value had to be read with the definition of "spare" in the Import Policy as a part or sub-assembly meant to replace an identical part. The imported seals were different in size, specification and code, were precision-made for specific pumps, and were not interchangeable. On that footing, each item constituted a distinct spare capable of being separately assessed for the value limit.

Conclusion: The five consignments of mechanical seals were separate items, and they could not be clubbed together as one unit; the answer was in favour of the assessee.

Issue (ii): Whether fine in lieu of confiscation could be imposed when the importer had disclosed the goods fully and there was no deliberate contravention.

Analysis: The disclosure was complete, the importer bona fide proceeded on the view that each item was separately countable, and the goods were required for use in manufacture and safety-related operations. In these circumstances, the case did not disclose a deliberate breach warranting penal action by way of fine in lieu of confiscation.

Conclusion: Fine in lieu of confiscation ought not to have been imposed; the answer was in favour of the assessee.

Final Conclusion: The reference was answered in favour of the assessee on the substantive questions, and the import was held to be valid in law while the penal consequences were set aside.

Ratio Decidendi: Where an import policy provision is reasonably capable of two constructions, the construction beneficial to the importer must be adopted, and tailor-made, non-interchangeable replacement spares may be treated as separate items for the prescribed value limit.

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