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SIEMENS ENGINEERING AND MFG. CO V. UNION OF INDIA

Siemens Engineering and Mfg. Co v. Union of India (1976 AIR 1785)

ISSUE:

  • Whether pot motors imported separately from Rayon Spinning frames should be classified under Item 72(3) or Item 73(21) of the First Schedule to the Indian Customs Tariff for customs duty assessment?

RULE:

  • Special provisions prevail over general provisions – Item 72(3) being a specific item covering pot motors takes precedence over Item 73(21) which is a general item for electric motors.
  • Administrative authorities and tribunals must provide reasoned orders when exercising quasi-judicial functions as per principles of natural justice.
  • Words in statutes should be interpreted based on proper grammatical construction – “not otherwise specified” qualifies “machinery” and not “component parts” based on the conjunction ‘and’ and sentence structure.

FACTS:

  • Kesoram Industries got a license to import complete Rayon plant with spares.
  • They imported spinning frames from Japan and authorized Siemens to import 4000 pot motors from Germany.
  • Initially customs assessed 15% duty under Item 72(3).
  • Later, Assistant Collector demanded differential duty claiming motors fell under Item 73(21) with 20% duty.
  • Siemens’ appeals to Collector and Government of India were rejected.

HELD:

  • Appeal allowed. The original assessment of pot motors under Item 72(3) at 15% duty was correct since:
    • Item 72(3) is a specific provision for component parts of machinery while Item 73(21) is a general provision for electric motors.
    • Pot motors being specially designed, essential components of rayon spinning machines that cannot be used for any other purpose fall squarely within Item 72(3).
    • Separate importation contracts for spinning frames and motors from different countries does not affect their classification as component parts.
  • The subsequent demand for differential duty was unjustified and orders of Assistant Collector, Collector and Government of India were quashed with direction to refund the recovered amount to appellants.
  • Court criticised authorities for not providing proper reasoned orders.