Customs, Excise and Gold Tribunal - Delhi
Orissa Air Products Ltd. vs Collector Of Customs on 23 December, 1997
Equivalent citations: 1998(103)ELT583(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. In this appeal filed by M/s. Orissa Air Products Ltd. (OAPL), the matter relates to the classification under Heading No. 98.01 of the Customs Tariff, of the 900 numbers empty seamless steel cylinders for dissolved acetylene gas of water capacity 40 litres (hereinafter referred to as 'Cylinders')- The cylinders were proposed to be imported for meeting the targeted production of dissolved acetylene (DA) gas plant already commissioned in July, 1985. The Heading No. 98.01 of the Customs Tariff related to the project imports attracting concessional rate of customs duty. The ground on which the benefit of project imports was sought was that the initial setting up of the plant, was not completed. The appellants had placed purchase order dated 18-3-1988 on the foreign suppliers for import of the above cylinders and applied for registration of their purchase order with the Customs under the Project Imports Regulations, 1986 on 25-1-1988. The application was rejected by the Asstt. Collector of Customs, Calcutta, on the ground that admittedly the commissioning of the plant was already over and the commercial production of the gases had already started. The registration had not been sought on the ground of substantial expansion. On appeal, the view taken by the Asstt. Collector of Customs, Calcutta, was confirmed by the Collector of Customs (Appeals), Calcutta.
2. The matter was posted for hearing on 30-9-1997, when Shri J.S. Agarwal, Advocate, appeared for the appellants. Shri S.N. Ojha, JDR, represented the respondents/Revenue.
3. Shri J.S. Agarwal, Advocate, briefly narrated the facts of the case and submitted that the import of the DA gas cylinders was for implementation of the project and had to be taken as for initial setting up of the project irrespective of the commissioning of the plant with lower capacity. He submitted that the matter was covered by the Calcutta High Court decision in the case of Asiatic Oxygen Ltd. v. Asstt. Collector of Customs -1992 (57) E.L.T. 563 (Cal.).
4. In reply, Shri S.N. Ojha, JDR, stated that the project had already been commissioned in the year 1985 while the licence for import of the DA gas cylinders was issued in the year 1988. No case had been made out for expansion of the capacity of the plant. As the project had already been commissioned and the commercial production had also started, the import made after the commissioning could not be taken as the import for initial setting up of the plant. He reiterated the findings in the Order-in-Original as confirmed by the Collector of Customs (Appeals).
5. We have carefully considered the matter. OAPL were granted an industrial licence (carry on business) on 22-9-1984 by the Ministry of Industry, Department of Industrial Development, for setting up a project for the manufacture of oxygen gas and D.A. gas with the following provisional installed capacity:
Oxygen Gas 1 million cu.m. D.A. Gas 0.20 million cu.m.
6. According to para 5 of the Industrial Licence, the undertaking was to be completed and commercial production established within a period of one year from the date of issue of the Industrial Licence. The Industrial Licence was issued on 22-9-1984. In para 3 of the licence, it was stated that the issue of the Industrial Licence was subject to the condition that the undertaking will have the production capacity approved and fixed finally by the Central Government on the basis of the actual production for a period of three years after the unit went into commercial production. Before the one year period was over OAPL under their letter dated 27-3-1985 made an application to the Chief Controller of Imports and Exports (CCIE) for granting of an import licence for import of 60% of their total cylinder requirement. They had submitted that they would be obtaining 40% of their total requirement from the indigenous manufacturers. This requirement was so met from indigenous sources. CCIE agreed ii principle to allow the import under their communication dated 15-10-1985 an called for some further information/documents to enable them to process th case f issue pf import licence. It is seen from the import licences on orecon that the licence for import of oxygen gas cylinders was issued on 13-10-1987 and that for import of DA gas cyljnders on 20-1-1988. After obtaining the import licence, OAPL wrote to the directorate general of Technical Develop ment (DGTD) on 14-3-1988 for clearance under the provisions of the Project Import Regulations, 1986. A revised application was filed on 14-6-1988. The DGTD in their communication dated 24-64988 addressed to the Collector of Customs, Calcutta, certified that the cylinders were required for initial setting up of the plant and recommended for grant of concessional rate of customs duty under project imports Heading No. 98.01. In the meanwhile, the OAPL had placed purchase order on 18-3-1988 with the foreign suppliers for import of 900 numbers of DA gas cylinders of 40 litres water capacity. On 25-1-1989 an application was filed with the Asstt. Collector of Customs for registration of the contract which was dated 18-3-1988 on the ground that the cylinders were required for initial setting up of the project.
7. According to para 5 of the industrial licence, the undertaking was to be completed and commercial production established within a period of one year from the date of issue of the industrial licence which in this case was dated 22-9-1984. The Asstt. Collector of Customs, Calcutta, rejected the request od OAPL for registration of the contract under Project Import Regulations, 1986 on the ground that the commercial plant was already over and the commercial production had started.
8. The industrial licence was for an annual capacity of 1 million cu.m. of oxygen gas and 0.20 million cu.m. of DA gas. In their communication dated 27-3-1985 addressed to the CCIE, OAPL had submitted that for implementing the project, they shall be requiring 5100 nos. oxygen cylinders and 1200 nos. DA gas cylinders as per the norms of cylinder entitlement. Against this re-quirement, they intimated that they shall be requiring 40% i.e. 2040 nos. of oxygen and 480 nos. DA gas cylinders from the indigenous manufacturers, M/s. Bharat Pumps & Compressors Ltd., Naini, Allahabad, and the balance 60% i.e. 3060 nos. oxygen and 720 DA gas cylinders was to be met through imports. These 720 nos. of DA gas cylinders proposed to be imported were of 45 litres water capacity. The number was increased to 900 nos. on the proposed import of cylinders of 40 litres water capacity. The DGTD had recommended the case under their communication dated 24-6-1988 addressed to the Collector of Customs, Calcutta, in the following terms :
"Please find enclosed herewith a copy of letter No. GOPL: P-2: PK-678, dated 14-6-1988, from M/s, Orissa Air Products Ltd., re: availing concessional rate of customs duty under project import. M/s. Orissa Air Products are having an industrial licence No. IL 317(84), dated 22-9-1984 for manufacture of industrial gases. On the basis of our recommendation for import of cylinders, office of the CCI&E have issued import licence No. P/CG/2042673, dated 20-1-1988 for import of 900 nos. of empty DA cylinders of 40 litre water capacity for a total cif value of Rs. 11,62,100/-. These cylinders are required for initial setting up of the plant. As such this office recommends the concessional rate of customs duty under Para 98.01 of Indian Tariff & Customs Act, 1986-87 in favour of M/s. Orissa Air Products Ltd. Kindly note that earlier recommendations issued vide this office of even number dated 16-5-1988 in respect of 900 nos. of empty DA gas cylinders of 45 litre water capacity for a total cif value of Rs. 12,78,300/- may be treated as cancelled.
9. Although, the OAPL had applied for import licence on 27-3-1985, the import licence was actually granted only on 20-1-1988. To meet the requirement of the licensed capacity as per Industrial Licence dated 22-9-1984, the need for imports had earlier been projected in their application dated 27-3-1985 addressed to the CCIE for grant of import licence.
10. The registration of the contract had been'denied on the ground that as per Clause 5 of the Industrial Licence dated 22-9-1984 the undertaking was to be completed and commercial production established within a period of one year from the date of issue of the industrial licence. It had been noted by the adjudicating authority that the DA gas plant was commissioned and the commercial production started in July, 1985. We consider that the commissioning of the plant does not necessarily mean that all parts of the unit had been fully established and the capacity to meet the targeted production had been achieved. A unit may be commissioned even before the trial production. Even when commercial production had started, it may so happen that its rated capacity is yet to be utilised. While 'initial' pertains to the first stage, it could not be said that with the start of the commercial production in a case of this nature where production of gas will depend upon the availability of the cylinders for its packing, the first stage is already over. The facts of this case establish that the import of the DA gas cylinders was part of the initial setting up of the undertaking for meeting the requirements of licensed capacity. This was the first import of DA gas cylinders in this case.
11. We find that in the case of Asiatic Oxygen Ltd. v. Asstt. Collector of Customs -1992 (57) E.L.T. 563 (Cal.), the Calcutta High Court had observed that the setting up in the context of Project Imports meant to complete and that the phrase "initial setting up" was not in consistent with phased implementation. The High Court had also observed that the recommendations of the DGTD could not be dismissed. Paras 14,15,16 & 17 from that judgment are extracted below:
"14. Secondly the Customs Authorities cannot dismiss the recommendations and endorsement of the DGTD and the CCI & E as being "certificate of busy bodies". The certification was made pursuant to the import and export procedure prescribed by the Government of India and the relevant rules in this regard. The Customs Authorities are a department of the same Government. It is arbitrary on their part to put a construction on the phrase "initial setting up" different from the construction put by the other departments of the Government of India. It may be noted that the CEGAT in M/s. Unival Surgical Traders v. Collector of Customs, Cochin reported in 1988 (37) E.L.T. 58 (Tribunal) held that in a case where the Deputy Chief Controller of Imports and Exports had interpreted a particular phrase in a particular manner, the customs authorities should also give the same interpretation to the same phrase for the purpose of Customs duty.
15. In another decision of the CEGAT in Collector of Customs, Bombay v. Bharat Heavy Electricals Ltd. reported in 1984 (17) E.L.T. 525 it was held -
"These licences having been endorsed as Project Import, there was no reason for the Assistant Collector to deny the registration of the contract."
16. I also accept the contention of the petitioners that the obvious object behind Heading No. 84.66 was to promote industrialization. Therefore, the Heading '84.66' must be construed liberally. As stated by the Supreme Court in the Straw Boards case (supra).
"It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity a liberal construction should be put upon the language of the statute."
17. Furthermore para 4 of the Project Imports (Registration of Contract) Regulations, 1965 insofar as it is material provides as follows -"Assignment of number to the contract. The proper officer shall, on being satisfied that the application is in order, register the contract by entering the particulars thereof in a book kept for the purpose."
12. In view of the above discussion, we consider that the rejection of the request of OAPL for registration of the contract on the grounds taken by the Revenue was not justified. As a result, the appeal is allowed with consequential relief to the appellants. Ordered accordingly.