Customs, Excise and Gold Tribunal - Delhi
Collr. Of Customs vs Hydranautics Membrane (India) Ltd. on 25 January, 1994
Equivalent citations: 1994ECR270(TRI.-DELHI), 1994(71)ELT711(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 30-12-1992 passed by the Collector of Customs (Appeals) Bombay. The appellants filed Bill of Entry No. 4858 dated 16-11-1991 for the clearance of a consignment of Membrane Support Substrates, Product Carrier and Casting Powder. In the Bill of Entry the appellants declared the goods as classifiable under Tariff Heading 8421.99 as parts of R.O. Membrane System (Water Treatment Plants). The appellants also claimed the assessment of the goods at the concessional rate of duty in terms of Notification No. 155/86-Cus., dated 1-3-1986. The Assistant Collector observed that the goods in question being in running length could not be treated as 'parts' for R.O. Membrane System. He heid that goods being 'raw materials' were not eligible for exemption under Notification No. 155/86-Cus., dated 1-3-1986. Being aggrieved by the order passed by the Assistant Collector, the appellants filed an appeal before the Collector (Appeals) who allowed the appeal on the ground that the disputed goods in running length could be made usable by simply cutting the rolls into required sizes.
2. Appearing on behalf of the appellant, Shri B.K. Singh, Learned SDR stated that the observation of the Collector (Appeals) that cutting of the material in the form of rolls is not recognised as manufacture is erroneous. He stated that in the case of Dipen Textiles (P) Ltd. v. Collector of Central Excise reported in 1992 (62) E.L.T. 430 the Tribunal has held that slitting and cutting of jumbo rolls of video magnetic tapes into pancakes amounts to manufacture. He submitted that the imported goods being in running length had to be deemed as raw materials. He added that in the absence of any definition of 'parts' in Notification No. 155/86 in terms of the Supreme Court's judgment in the case of Star Paper Mills Ltd. v. Collector of Central Excise reported in 1989 (43) E.L.T. 178 it would be permissible to refer to the dictionary meaning for determining the meaning of 'parts'. He stated that according to the Concise Oxford Dictionary, 7th Edition "part" means "component of a machine etc.". He added that Blacks Law Dictionary, also defines a "part" as "something essentially belonging to a larger whole, an integral portion". Shri Singh contended that the goods in question having been imported in running length, they could not be deemed as "parts" since they cannot form a component of any machine or appliance and it cannot be said that in the form in which they have been imported they can form an integral part of any item. He submitted that the order passed by the Collector (Appeals) was not sustainable since in interpreting the term "parts" in the relevant notification he had overlooked the requirement that exemption notifications have to be interpreted strictly according to the actual words used therein. In support of his contentions he cited the following case law :-
1. Sakthi Sugars Limited, Coimbatore v. Union of India and Ors., 1983 (12)E.L.T. 484 (Mad.)
2. Union of India v. Wood Papers Ltd., 1990 (47) E.L.T. 500 (S.C).
3. Vikrant Tyres v. C.C.E. Bangalore, 1988 (38) E.L.T. 301 (Trib.).
3. Appearing on behalf of the respondents, Shri P.M. Dave, the Learned Advocate raised the preliminary point that the appeal was not maintainable since in Column 10 of the Form C.A. 3 the appellants had not indicated the relief claimed in the appeal. Making his submissions on merits of the case, Shri Dave stated that the exemption under the Notification No. 155/86 was subject to the condition that the concerned specified authority on being satisfied issues a certificate giving the description and quantity of the parts in question as are or will be required for the purpose specified in the notification and also recommends that the exemption in terms of the notification may be granted. Shri Dave stated that the respondents had filed the required certificate issued by the D.G.T.D. and this fact had not been disputed by the appellants. He contended that the required certificate from the D.G.T.D. having been filed by the respondents the Customs authorities could not sit in judgment regarding the validity of the certificate or deny the exemption to the respondents. He referred to the literature relating to Reverse Osmosis Systems for Desalination of sea water and stated that the imported materials after being cut to the required size are used in pressure tubes as membrane elements. He stated that the materials in question have necessarily to be imported in running lengths as it would not be economical to import them in cut form. He contended that the process of cutting the material only renders it readily usable and does not amount to manufacture since no new part or product having different name or characteristics emerges. He reiterated his stand that the goods being covered by the prescribed certificate issued by the D.G.T.D. have to be deemed as parts eligible for exemption under Notification No. 155/86. In support of his contentions he cited the following decisions :
Collector of C.E., Bombay v. Kiran Spinning Mills -1988 (34) E.L.T. 5 (S.C.);
and Straw Board Mfg. Co. Ltd. v. Collector, CE -1990 (48) E.L.T. 109 (Trib.).
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only questions that arise for consideration in this case are whether (1) the imported goods which were in running length and not cut to size or ready for fitment as component part of any article or machinery could be deemed as parts eligible for exemption in terms of Notification No. 155/86; (2) the goods which are held to be other than parts would be eligible for exemption when covered by a certificate issued by the concerned authority in terms of condition (1) of the notification.
5. The appellants contention is that the Collector (Appeals) has erred in holding that the imported materials in running length could be deemed as parts since all that was required before putting the materials in the form of rolls to use as parts was to cut them to the required size and such cutting would not constitute manufacture of a raw product. In this regard we find that it is well settled that the goods have to be assessed in the form in which they are' imported or presented for assessment. It has been held by the Tribunal in the case of Shriram Refrigeration Industries Ltd. v. Collector of Customs, reported in 1993 (63) E.L.T. 593 that classification of goods depends on their condition at the time of their import. Hence the question whether the imported goods can be deemed as covered by the Notification No. 155/86 has to be decided only by taking into account the form in which they have been imported. For this reason, in our view, the argument that the goods could be converted into usable parts by the simple process of cutting which would not constitute manufacture, is not relevant.
6. We refer to the relevant extract of the Notification No. 155/86 which is reproduced below:
"Exemption to parts imported for the purpose of setting up for the assembly or manufacture of specified articles falling under Chapter 84 or 85. -
In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), and in supersession of the notifications of the Government of India in the Ministry of Finance (Department of Revenue) Nos. 94/86-Customs and 95/86-Customs both dated 17th February, 1986, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts parts required for the purpose of initial setting up, or for the assembly or manufacture, of any article specified in column (2) of the Table hereto annexed, when imported into India and proved to the satisfaction of the Assistant Collector of Customs, to be so required for such setting up, assembly or manufacture, from so much of that portion of the duty of customs leviable thereon which is specified in the corresponding entry in column (3) of the said Table, subject to the following conditions, namely :-
(1) The authorities mentioned below are satisfied and certify in each case that the description and quantity of the parts in question as are or will be required for the purpose specified above and recommend grant of the above exemption:"
It is seen that the Notification exempts, subject to the fulfilment of certain conditions, parts required for the initial setting up or for the assembly or manufacture of any article specified in Column (2) of the Table Annexed to the Notification when imported into India. In the case of Star Paper Mills Ltd. v. Collector of Central Excise, reported in 1989 (43) E.L.T. 178, the Hon'ble Supreme Court has held that in the absence of any definition of any word or expression in the statute, it would be permissible to refer to the dictionary meaning of that word or expression. We find that the word "part" which has not been defined in the Notification No. 155/86, according to the Chembers Twentieth Century Dictionary means :-
"Something less than the whole, a portion, that which along with others makes up, has made up, or may at some time make up a whole, a constituents"
It is also seen that according to the same dictionary the term "raw material" means:-
"material (often in natural state) that serves as the starting point of a manufacturing or technical process : that out which something is made or makable or may develop."
7. On a plain reading of the dictionary meaning of the terms "part" and "raw material" it follows that whereas a part which along with others makes up or is a constituent of something has necessarily to be in a state in which it can be used or fitted in the system of which it constitutes a part. On the other hand, "raw material" would be the material which through a manufacturing or technical process is transformed into finished goods. On these consideration, in our view, 1600 yds. of "Membrane Support Substrate - Polyster Cloth" and 512 yds. of "Product Carrier - Polyster Impregnated Fibre" imported in the form of rolls for use after being cut to the required sizes as parts of membrane elements in 'Reverse Osmosis Systems' for purification/desalination of sea water would have to be deemed only as "raw materials" and not parts.
8. It has also been contended on behalf of the respondents that the D.G.T.D. certificate required in terms of the condition of the Notification No. 155/86 having been filed by the importers, the Customs authorities were not entitled to sit in judgment regarding the validity of the certificate or deny the exemption under the said notification. In this regard we find that Notification 155/86 exempts partially from duty parts which are proved to the satisfaction of the Assistant Collector, to be required for the purpose of initial setting up, or for the assembly or manufacture of any of the articles specified in Column (2) of the Table annexed to the Notification. The exemption under the notification is further subject to the condition that concerned specified authority is satisfied and certifies the description and quantity of the parts in question are or will be required for the purpose specified in the Notification and recommends grant of the exemption. The Assistant Collector had held that the imported goods were raw materials and not 'parts'. It is therefore evident that the goods were not proved to the satisfaction of the Assistant Collector to be parts required for the purpose of initial setting up, or for the assembly or manufacture of any of the articles specified in Column (2) of the Notification. It has been held by the Bombay High Court in the case of Bharat Cottage Industries v. Union of India, reported in 1992 (59) E.L.T. 30 (Bom.) that every word used in an exemption notification has to be given effect to. Since we have concurred with the Assistant Collector's finding that in respect of the imported goods, the primary requirement laid down in Notification No. 155/86 that they should be 'parts' was not satisfied, we hold that the contention of the respondents that the goods in question were eligible for exemption since they were covered by a certificate issued by the D.G.T.D. as required by the condition of notification, has to be rejected. In any case, the said certificate could not have been of any assistance to the respondents since as seen from the following extracts from the copy of the D.G.T.D. certificate filed by the Learned Counsel for the respondents on 15-12-1993, after conclusion of the hearing, the application for the required certificate filed by the respondents describing the goods to be imported under the heading "Details of the components/raw materials with technical specifications" was merely signed by the Asstt. Development Officer with the remark "Attested for duty concession" without indicating in each case whether the item was 'part' or 'raw material' :-
_______________________________________________________________________ Components/Raw Materials to be imported under import licence No. P/D/030703 of 30-4-1991 for the manufacture of RO MEMBRANE ELEMENTS AND SYSTEMS ________________________________________________________________________ SI. SI. No. of Customs Details of the com- Qnty Classifica-
No. Notification & end ponents/raw material tion in Im-
products. with technical specifica- port Policy
tions of raw
materials
and com-
ponents.
_________________________________________________________________________ (1) Notification No. -- -- --
155/86/1-3-1986 Sr. No. l(g) - Cus-
toms Tariff No. 84- 21.21 (2) -do- -- -- --
(3) -do- Membrane Support Sub- 45820 Ft. --
strate - Polyster Fibre
Cloth P/N 84489.4000
(4) -do- Product Carrier Polyster 17400 Ft.
style fabric impregnated
with water based epoxy
resin P/N 84505.48 MO
(5) -- -- -- --
(6) -- -- -- --
__________________________________________________________________________
9. In view of the above discussion, we set aside the impugned order and allow the appeal.