Classification of imported spares upheld where separate consignments were not treated as complete instruments despite combined functionality.

Imported consignments brought under a licence for spares could not be treated as complete measuring instruments merely because two shipments, when combined, formed complete units. Customs had earlier treated the same goods as spares, and similar clearances supported the importer's declared classification in the Bills of Entry. Because the premise of misdeclaration failed, the show cause notice and ensuing proceedings were held unsustainable; inconsistent treatment by Customs was also found discriminatory and contrary to promissory estoppel. In the absence of misdeclaration and in light of bona fide import under the licence, confiscation and penalty under the Customs Act, 1962 were not attracted, and clearance was directed on the footing of spares.

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Issues: (i) Whether the imported consignments were spares of measuring instruments or complete measuring instruments, and whether the declarations and classification in the Bills of Entry were correct. (ii) Whether the show cause notice and the proceedings founded on it were without jurisdiction, arbitrary, discriminatory, or barred by promissory estoppel. (iii) Whether the goods were liable to confiscation and penalty under the Customs Act, 1962.

Issue (i): Whether the imported consignments were spares of measuring instruments or complete measuring instruments, and whether the declarations and classification in the Bills of Entry were correct.

Analysis: The goods were imported under an export house subsidiary licence permitting import of spares. The fact that two consignments, when combined, could form complete instruments did not by itself establish an intention to import complete instruments. The same goods had earlier been treated by Customs as spares, and similar imports were shown to have been cleared on that basis. The classification claimed by the importer as spares under the relevant tariff entry and notifications was therefore accepted.

Conclusion: The consignments were spares and not complete measuring instruments, and the declarations were held to be correct.

Issue (ii): Whether the show cause notice and the proceedings founded on it were without jurisdiction, arbitrary, discriminatory, or barred by promissory estoppel.

Analysis: Since the goods were held to be spares, the foundational assumption of misdeclaration in the notice failed. The Court also found discriminatory treatment, as similar goods had been cleared in other cases, and held that Customs could not take an inconsistent stand against the importer. On the earlier practice of clearance, the Court applied promissory estoppel against the respondents.

Conclusion: The impugned notice and the proceedings were held to be without jurisdiction and liable to be quashed.

Issue (iii): Whether the goods were liable to confiscation and penalty under the Customs Act, 1962.

Analysis: In the absence of misdeclaration and in view of the bona fide import under the licence, the statutory basis for confiscation and penalty did not survive. The Court accepted that the petitioners had imported the goods under a bona fide belief that they were spares and found no basis for invoking the confiscatory provisions.

Conclusion: The goods were not liable to confiscation or penalty under the Customs Act, 1962.

Final Conclusion: The writ petition succeeded, the show cause notice and consequential proceedings were quashed, and Customs was directed to permit clearance of the goods on the footing that they were spares and assess duty accordingly.

Ratio Decidendi: Goods imported in separate consignments under a licence for spares cannot be treated as complete instruments merely because they become complete when combined, and where Customs has consistently allowed similar imports as spares, an inconsistent contrary stand against one importer is discriminatory and cannot sustain confiscation or penalty.

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