Import licence restriction on generators did not cover alternators alone; exemption for generating set parts was also available.

Imported alternators without prime movers were treated as incomplete generating units, so the ITC restriction on electric portable generators up to 3.5 KVA did not apply and no import licence was required. The exemption under Notification No. 155/86 was also available because the notification covered parts required for assembly or manufacture of generating sets, and that benefit was not confined to parts classified under a single tariff heading. On that basis, the confiscation was held unsustainable and consequential relief followed.

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Issues: (i) Whether imported alternators without prime movers were covered by the ITC restriction on electric portable generators up to 3.5 KVA and therefore required an import licence. (ii) Whether the goods were eligible for exemption under Notification No. 155/86 as parts required for assembly or manufacture of generating sets.

Issue (i): Whether imported alternators without prime movers were covered by the ITC restriction on electric portable generators up to 3.5 KVA and therefore required an import licence.

Analysis: The restricted item had to be understood as a complete generator capable of producing electricity. An alternator by itself does not generate electricity unless coupled with a prime mover, and the ITC entry could not be stretched to cover a mere alternator described loosely as a generator. The tariff scheme and the policy entry operated in different contexts, and the imported goods lacked the essential component that would make them a complete generating unit.

Conclusion: The goods were not hit by the ITC restriction and no import licence was required.

Issue (ii): Whether the goods were eligible for exemption under Notification No. 155/86 as parts required for assembly or manufacture of generating sets.

Analysis: The notification covered parts required for assembly or manufacture, and its language did not require the parts to fall only under Heading 85.03. An alternator is a constituent part of a generating set, even if it may also be described as a sub-assembly. The goods were intended for use in assembling generating sets, and the exemption could not be denied on the ground that they were not classified as parts under a particular tariff heading.

Conclusion: The goods were eligible for the benefit of Notification No. 155/86.

Final Conclusion: The confiscation was unsustainable, the import was held to be free of licence requirement, and the appellants were entitled to the exemption benefit with consequential relief.

Ratio Decidendi: A policy restriction on generators applies only to a complete generating unit capable of producing electricity, and an exemption notification covering parts required for assembly or manufacture is not confined to parts classified under a single tariff heading where the goods are in substance constituent parts of the final assembly.

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