1991 (3) TMI 154 - HC - Customs

Quashed show cause notice, goods cleared as spares, equality enforced, promissory estoppel applied.

OPAL EXPORTS PVT. LTD. Versus COLLECTOR OF CUSTOMS

OPAL EXPORTS PVT. LTD. Versus COLLECTOR OF CUSTOMS - 1992 (60) E.L.T. 232 (Cal.) Issues Involved:1. Validity and legality of the show cause notice dated 13th November 1987.2. Classification and assessment of imported goods as spares or complete measuring instruments.3. Alleged discriminatory treatment by Customs authorities.4. Applicability of promissory estoppel against the Customs authorities.5. Jurisdiction and validity of the show cause notice and summons.Detailed Analysis:1. Validity and Legality of the Show Cause Notice:The petitioners challenged the show cause notice dated 13th November 1987, issued by the Customs authorities, on the grounds that it was perverse and without or in excess of jurisdiction. The Customs authorities alleged that the imported goods, when combined, constituted complete measuring instruments rather than spares, as declared by the petitioners. The petitioners contended that they had imported spares of measuring instruments and not complete instruments, and that correct declarations were made in the Bills of Entry.2. Classification and Assessment of Imported Goods:The Customs authorities refused to clear the goods on the basis that the imported spares, when combined, made complete measuring instruments. The petitioners argued that the goods were imported as spares under a valid subsidiary licence and should be classified as such. The court noted that the Customs authorities had previously allowed similar imports as spares and imposed customs duty at the rate applicable to spares. The court held that the mere fact that spares, when combined, constituted complete instruments was not sufficient to classify them as complete measuring instruments for customs duty purposes.3. Alleged Discriminatory Treatment by Customs Authorities:The petitioners contended that similar spares imported by other companies were cleared by the Customs authorities as spares, while their consignments were treated differently. The court found that the Customs authorities had indeed allowed similar imports as spares in the past and that the petitioners were subjected to discriminatory treatment in violation of Article 14 of the Constitution. The court directed the Customs authorities to allow clearance of the goods upon assessment and payment of duty as spares.4. Applicability of Promissory Estoppel:The petitioners argued that the Customs authorities were precluded by the doctrine of promissory estoppel from treating the imports as complete instruments, as they had previously allowed similar imports as spares. The court agreed, noting that the petitioners had made the imports based on the representation and promise by the Customs authorities that such imports would be treated as spares. The court referred to the Supreme Court decision in McDowell & Co. Ltd. v. Commercial Tax Officer, which supported the application of promissory estoppel in such cases.5. Jurisdiction and Validity of the Show Cause Notice and Summons:The court held that the show cause notice and the summons were without or in excess of jurisdiction, as the underlying assumption that there was a misdeclaration of the goods was incorrect. The court found that the goods were correctly declared as spares and that there was no mens rea or mala fide motive on the part of the petitioners. Consequently, the provisions of Section 111 of the Customs Act did not apply, and the show cause notice did not disclose any offence or violation. The court quashed the show cause notice and the proceedings initiated thereunder.Conclusion:The court allowed the writ petition, quashed the show cause notice and the proceedings initiated in pursuance thereof, and directed the Customs authorities to allow clearance of the goods as spares upon assessment and payment of duty. The court emphasized the need for equal treatment and the application of promissory estoppel against the Customs authorities. There was no order as to costs.