Customs, Excise and Gold Tribunal - Delhi
Toyo Engineering India Ltd. vs Collector Of Customs on 28 May, 1993
Equivalent citations: 1993ECR299(TRI.-DELHI), 1994(70)ELT769(TRI-DEL)
ORDER N.K. Bajpai, Member (T)
1. This matter has arisen out of a reference made by a three Member Bench of the Tribunal to the Hon'ble President for constituting a Larger Bench on the question whether, in the facts and circumstances of this case, the auxiliary equipment in the present case can be extended the benefit of concessional duty under sub-heading 9801.00 of the Customs Tariff. While making the reference, two of the Members of the Bench referred to a decision of a three Member Bench in the case of Punjab State Electricity Board, Patiala v. Collector of Customs, Bombay [1987 (27) E.L.T. 432 (Tribunal)] and observed as under:-
"19. The word 'specified' occurring in Heading 9801 and sub-heading 9801.00 has not been defined. Question is whether 'unit' occurring in sub-heading 9801.00 and the word 'specified' would mean that the items of machinery and auxiliary equipment etc. which can be extended the benefit of the said subheading 9801.00 must be confined to a particular project, as appears to have been construed in the case of PSEB, mentioned supra by the Tribunal or it can be extended even to such items of machinery and auxiliary equipment which are liable to be used in different types of projects and industrial plant, as mentioned in that Heading 9801. From the reading of the description under sub-heading 9801.00, as extracted above, narrow construction of the sub-heading adopted in PSEB as confined to a particular project is perhaps not warranted. The items entitled to benefit, it can be argued with some force, may be used in any or all of the specified projects mentioned at S. Nos. (1) to (6) in the sub-heading 9801.00."
2. The matter was heard over a period of six sessions and detailed arguments were submitted by both sides. Before we proceed to the matter a brief narration of the facts may be made. The appellants imported a consignment of used and second-hand construction aids and machinery, tools, tackles, instrument spares, etc. from Kuwait. On 17th March 1986, they made an application to the Assistant Collector of Customs, Project Import Group 'K' of the Bombay Customs House for registration under the Project Import (Registration of Contract) Regulations, 1965 for assessment of the goods under Heading 98.01. These goods were required for initial setting up of Ammonia Storage Package Unit and Co-generation Plant of the Indian Farmers Fertilizers Cooperative Limited (IFFCO) being installed at Aonla, near Bareilly, U.P. The relevant extract from the application is as under:-
"We state that we have at our disposal necessary erection machinery equipment and other items lying at our overseas project and the same are being imported for use in the initial setting up of the fertilizer project of IFFCO at Aonla.
We have approached Director of Industries for the recommendation for availing the benefit of project import duty exemption and will submit the same in due course. In view of the fact that the use of the imported goods is essential for the initial setting up of the fertilizer project, we submit that the said goods are classifiable under Heading 98.01....
We may mention that the subject goods are bought by us in Kuwait for execution of overseas project with RBI's approval in terms of the Import Policy 85-88 para 213(5) and accordingly, no Import Licence or CCP is required for the clearance of the same and therefore the question of separate contract with the foreign supplier does not arise in this case." (Emphasis added)
3. By an order, dated 18th August 1987, the Assistant Collector of Customs, Contract Cell, rejected the application for registration on two grounds. The operative part of this order is as under:
"3. ... In the instant case, the status of the importer is that of a Private Contractor who has been entrusted certain work. For execution of the contract, the importer has imported machinery, equipment etc. The imported goods are the property of the importer and even after execution and completion of the work, these will remain their property. The ownership of the imported goods will not pass on to the project authority, i.e. IFFCO, who is the ultimate beneficiary of the project import duty concession. The imported goods, after completion of the work can be used for other works elsewhere. Under these facts and circumstances, the imported goods would not on its own merit qualify for classification under 98.01. Director of Industries has no doubt recommended for project import benefit, but the issue of classification is to be decided by the Department". (Emphasis added)
4. When the matter went up in appeal to the Collector of Customs (Appeals), Bombay, he too rejected the appeal and the relevant extracts of his order are quoted below:-
"... There is no doubt that all items of machinery including components or raw materials for the manufacture of the machinery required for the initial setting up of a Fertilizer Unit would be classifiable under Tariff Heading 98.01. However, what is important in this case is that such items of machinery or components etc. should be required for the initial setting up of a Unit or substantial expansion of an existing unit. This would denote that such items of machinery or component parts should go into the initial setting up of the Unit and should not merely be used as an aid for such setting up of the unit or its substantial expansion. In the present case, the appellants are only the contractors and the machinery used by them in the initial setting up of the Fertilizer Plant would not go into the formation of the plan itself but would be acting as an aid in its setting up. The appellants have conceded that the machinery was lying with them in Kuwait from where they had imported it for the fertilizer project of IFFCO. They have further conceded during personal hearing that the machinery could be used for setting up of other projects, such as Power Projects, Petro-chemical Projects etc. The appellants are only the job workers. It is clear from the Tariff Heading 98.01 that the concession is meant to be given only to the projects with a view to reduce their cost and the concession is not meant to be given to the contractors who do only job work for a fee or for charges."
5. Thereafter, when the matter went up in appeal to the Tribunal, while one of the Hon'ble Members initially proposed allowing the appeal, the other two Members referred the matter to the Hon'ble President for constituting the Larger Bench. That is how the matter is now before us.
6. Shri D.K. Subhedar, the learned Counsel for the appellants has raised the following questions during the hearings and has also submitted written notes of his arguments:-
(a) The reference to the Larger Bench is totally redundant because the ratio of the decision in the Punjab State Electricity Board (PSEB - for short) relied upon by the Hon'ble Members for making the present reference is not at all applicable on the facts, circumstances and law obtaining in the case of the appellants and the Hon'ble Member who initially allowed the appeal has relied upon the decision of the Supreme Court.
(b) There is complete unanimity amongst all the three Members on the question that the subject goods are "auxiliary equipment" being construction aids etc., the issue whether the goods are "auxiliary equipment" or not remains no longer to be decided by the Larger Bench.
(c) Even while making the reference to the Larger Bench, Hon'ble Member (Technical) has even suggested that a narrow construction of Heading 98.01 was not warranted and the third Member having concurred with this view, the reference to the Larger Bench is only on a limited issue. Therefore, none of the other issues of fact and law are required to be re-looked into and dealt with by the Larger Bench.
(d) In view of the Department's admitted position that the imported goods were to act as an aid in setting up the specified project, the benefit of concessional rate cannot be denied to the appellants just because the appellants stated before Collector (Appeals) that if the imported machinery was still serviceable after being used in the project, they might make use of the same in some other project.
(e) Since the subject goods were undoubtedly required for initial setting up of a specified notified project, the benefit of exemption from duty under Notification 72/85-Cus., dated 17-3-1985 as amended should be extended.
(f) It has been held by the Supreme Court in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Ors. [1983 (13) E.L.T. 1566 (SC)] that the condition of an article at the time of its import is a material factor for the purposes of its classification and any enquiry into its possible future use is entirely unwarranted. Neither Heading 98.01 nor Notification 72/85-Cus. contain any expression requiring the Customs authorities to make any such enquiries. The possibility of further use in any case depends on several unforeseen aspects and should not be taken into account.
(g) Since learned Member (Technical) has suggested that a liberal view is warranted, the definition of the expression "Unit" in the Project Imports Regulations, 1986 whereby even a unit of a larger project qualifies for assessment, the benefit of assessment under 98.01 may be extended to the appellants.
7. Appearing for the Department, Shri M.S. Arora, the learned Departmental Representative submitted that the question of reference to the Larger Bench stands settled by the judgment of the Supreme Court in the case of Union of India v. Paras Laminates (P) Ltd. [1990 (49) E.L.T. 322 (SC)]. He explained that out of three Members of the Referring Bench, it was decided to refer the matter by a majority of 2:1 and, therefore, no reliance could be placed by the learned Counsel on the order written by the third Member initially allowing the appeal. Subsequently, he too fell in line with the others on the question of reference to the Larger Bench. As things stand, the minority view has no legal force. It was not, therefore, open to the learned Counsel to draw sustenance from the minority view. As regards the point at (b) above, it would not be correct to say that there was complete unanimity amongst all the three Members. The position was quite clear that the learned Member (Technical) who suggested the reference to the Larger Bench took note of the decision of the three Member Bench of the Tribunal in the PSEB's case and, accepting it as binding, felt it necessary to refer to the President for constituting Larger Bench for considering whether the auxiliary equipment in the present case could be assessed under sub-heading 98.01.
8. Shri Arora contested the view that even when the matter was referred to the Larger Bench, none of the questions of fact and law, except the consideration of the limited issue could be argued before the Larger Bench. He submitted that the matter was wide open and the Larger Bench is competent to go into all questions and pronounce a judgment on the appeal, and placed reliance on the decision of the Supreme Court in the case of Paras Laminates (supra) for this purpose.
9. On the question of the possible use of the subject goods after their use in the present project, Shri Arora referred to Note (2) to Chapter 98 and submitted that Heading 98.01 would apply to goods imported in accordance with the Project Imports Regulations, 1986. Although end-use of imported goods is ordinarily not taken into account, the wording of sub-heading 9801.00 was itself indicative of the end-use inasmuch as these would qualify for assessment under that sub-heading only if they were "required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified industrial plant etc.". For this, he referred to the decision of the Supreme Court in the case of Chowgule & Co. Pvt. Ltd. and Anr. v. Union of India and Ors. [1987 (28) E.L.T. 39 (SC)], in which the expression "goods for home consumption" came up for consideration. The Apex Court held as under:-
"14. In our view, for the purpose of levy of customs duty in order to determine whether any imported goods or "goods for home consumption", we have to find out the primary intended use of the goods when the goods are brought into Indian Territorial Waters."
10. In view of such an exposition of the law, the expression "required for initial setting up of a unit..." could not be interpreted in such a way that the subject goods were not used in the setting up of the project. Shri Arora contested Shri Subhedar's point about the requirement of the Customs authorities to make enquiries about future use, and submitted that the language used in sub-heading 9801.00 was such that the end-use of the subject goods had necessarily to be taken into account in accepting the classification under that subheading.
11. Shri Arora raised the following two points:
(a) Whether the project for which the goods are imported has to be specific or not
(b) Is ownership of the imported goods a relevant criteria for classification under sub-heading 9801.00.
12. Referring to the point at (a) above, Shri Arora submitted that the wordings of sub-heading 9801.00 were quite clear on the subject inasmuch as the machinery, equipment etc. required for the initial setting up of a unit or the substantial expansion of an existing unit had to be of a specified industrial plant etc. The Project Import Regulations also talked of a specific contract and of the registration of such a contract etc., and the three Member Bench of the Tribunal had also taken this view in PSEB's case. As far as the question of ownership was concerned, he referred to the decision of the Supreme Court in the case of Jacsons Thevara v. Collector of Customs & Central Excise, [1992 (61) E.L.T. 343 (SC)] and submitted that the Court has held in this case that when goods imported for a project and assessable to duty under Heading 84.66 were transferred to another company contrary to the declaration of the importer, assessment under Heading 84.66 was not permissible. Since such a view had been taken by the Apex Court, it could not be contended that ownership of the unit was not a material consideration in accepting assessment under Heading 98.01. On the final day of the hearing of the matter, Shri Arora explained that with the coming into force of the Customs Tariff (Amendment) Act, 1985 with effect from 28th February 1986, Heading 84.66 was replaced by Heading 98.01, so far as Project Imports were concerned. The Project Import (Registration of Contract) Regulations, 1965 had been superseded by the Project Imports Regulations, 1986 which came into force on 3rd April 1986. As a consequence of these changes, while new Heading 98.01 for project imports was incorporated in the Customs Tariff with effect from 28th February 1986, the corresponding Project Imports Regulations were not made until 3rd April 1986, with the result, that between 28th February 1986 and 2nd April 1986, there were no regulations to govern the import of goods classifiable under Heading 98.01. The appellants' case is that they had filed the Bill of Entry for the clearance of their goods on 11th March 1986 and duty was paid on 25th March 1986. Therefore, on the date of clearance of the goods, which the learned Counsel has stated to be 27th March 1986 (with reference to Bombay Port Trust Import Application, dated 27th March 1986), there were no regulations to govern the classification of goods under Heading 98.01 and the saving clause in Project Imports Regulations, 1986 would save only things done or omitted to be done before such supersession (3rd April 1986) when the new Regulations came into force, which means the contracts registered before 3rd April 1986. Since the old regulations related to assessment under Heading 84.66, and the claim for registration of contract in the present case relates to assessment under Item 98.01, the old Regulations also would not apply. The consequence of this was that the appellants' contract could not have been registered on 17th March 1986 when they filed the application in the absence of regulations relating to Heading 98.01.
13. Shri Arora submitted that a question would arise as to how the Assistant Collector and Collector (Appeals) could have passed an order rejecting the application for registration of contract on an altogether different point. He referred to the following decisions to support the view that the Tribunal can entertain new or additional point raised before it for the first time and the function of the appeal is the same as the function of assessment :-
(i) Steel Containers Ltd. v. Commissioner of Income-Tax, West Bengal II, Calcutta - 1978 Vol. 112 ITR 994
(ii) Controller of Estate Duty v. R. Brahadeeswaran - 1987 Vol. 163 ITR 680
(iii) Commissioner of Income Tax (Central), Madras v. Indian Express (Madurai) Private Ltd. - 1983 Vol. 140 ITR 705
14. In view of these decisions, submitted Shri Arora, since the matter was now before the Larger Bench of the Tribunal on a reference from three Member Bench, it was only appropriate that a correct decision on the question of classification should be arrived at without confining to the issues raised before the lower authorities.
15. Shri Arora referred to the following expression "auxiliary equipment" in Heading 98.01 "all items of machinery ...(including those required for research and development purposes, testing and quality control) ... required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified industrial plant", and submitted that in order to determine whether the goods are required for the initial setting up, etc., one had to find out the primary intended use of the goods.
16. He cited the following decisions:-
(a) Chowgule & Co. Pvt. Ltd. and Anr. v. Union of India and Ors. - 1987 (28) E.L.T. 39 (SC)
(b) Appraiser, Madras Customs v. Tamil Nadu Newsprint Papers Ltd. - 1988 (36) E.L.T. 272
(c) Orkay Silk Mills P. Ltd. v. Government of India - 1988 (36) E.L.T. 399 (Bom.)
17. Shri Arora explained that the Madras High Court clarified in the judgment cited at (b) above, that the purpose of introducing Heading No. 84.66 was to avoid hardship to the importers establishing new projects. He read out the following portion of the judgment:-
"9. A reading of the entry under the Heading 84.66 shows that it is not a residuary heading or a general heading relating to any class of goods. It is a specific entry introduced with the purpose and it relates only to goods imported for the initial setting up of a unit or a substantial expansion of an existing unit of a specified industrial plant, irrigation project etc. When an importer registers a contract as required in the entry under the Heading 84.66 all the goods imported by him under that contract will be subjected to duty only as per that entry. It will not be open to the Revenue to pick out some of the goods imported under the contract and impose a different rate of duty on the footing that they would be covered by a different heading. If the conditions prescribed under the Heading No. 84.66 are satisfied, the duty is imposed on the goods imported under that heading, as if they form the composite unit." (Emphasis added)
18. In the decision of the Bombay High Court in the case of Orkay Silk Mills Pvt. Ltd. (supra), the High Court had held that the Transfer Printing Machine imported in that case was vised only for printing on fabrics and could not be used for printing on garments direct and therefore its import was not held to be permissible. Similarly, for goods to be classifiable under Heading 98.01, they had to be project specific or, in other words, relatable to the specified project. In this view of the matter, the erection and other equipment imported by the appellants which could be used in several different projects did not qualify for assessment under Heading 98.01. The next argument of the learned Departmental Representative was that, should his submissions be not acceptable to the Tribunal, the matter would have to be remanded to the lower authorities for deciding whether exemption under Notification 72/85-Cus., dated 17-3-1985 claimed by the appellants was admissible because this question has not been examined by the authorities. For this purpose, he referred to the decision of the Tribunal in the case of Bombay Dyeing and Manufacturing Co. Ltd. v. Collector of Customs, [1991 (51) E.L.T. 65 (Tribunal)]. On the question of exemption under Notification 72/45, he also referred to the decision of the Supreme Court in the case of Eskayef Ltd. v. Collector of Central Excise, [1990 (49) E.L.T. 649 (SC)], in which it was held that exemption notification cannot change classification of goods from one entry to another. On the question of applicability of Chapter Notes in the Tariff Schedule to be of binding nature, Shri Arora referred to the Larger Bench decision of the Tribunal in the case of Saurashtra Chemicals, Porbandar v. Collector of Customs, Bombay, [1986 (23) E.L.T. 283].
19. Replying, Shri Subhedar submitted that the learned Departmental Representative had not made any arguments on the question of reference to the Larger Bench and the decision of the Supreme Court in Paras Laminates case (supra) was limited to the point that a Larger Bench of the Tribunal could be constituted to resolve any doubts about the correctness of an earlier decision of the Tribunal by a later Bench. Referring to the argument of Shri Arora that there were no regulations to govern project imports after replacement of Heading 84.66 from 28th February, Shri Subhedar submitted that the appellants should not be penalised since it was the Central Board of Excise & Customs which had failed to frame the regulations. The appellant, he submitted was entitled to registration of his contracts in terms of the old regulations, which were still in force. He also submitted that with the coming into force of the new Tariff with effect from 28th February 1986, Heading 98.01 had come into force and, this Heading being more liberal, and the goods in question having been imported in March 1986, the appellants were entitled to assessment under this Heading. As regards the claim for exemption from duty under Notification 72/85-Cus., dated 17-3-1985, he submitted that this being a Notification under Section 25 of the Customs Act, the appellants were entitled to the exemption. He also referred to the decision of the Supreme Court in the case of Mohinder Singh Gill and Anr. v. Chief Election Commissioner, New Delhi and Ors. [AIR 1978 SC 851] and submitted that it was not permissible for the authorities to start judging the validity of the order of the lower authorities on the basis of reasoning subsequently advanced and not found in the order.
20. When the hearing had almost concluded, Shri Subhedar submitted a Note in which he countered the arguments of the learned Departmental Representative that there is no reference whether the goods are auxiliary or not in the impugned orders, thereby appearing to have implied that the said issue was not discussed in the impugned order. He reiterated his argument that there was complete unanimity among all the Members of the Referring Bench all the findings of facts and law with the only difference that two Members took the initiative in making the present reference in order to have liberal interpretation and to maintain judicial decorum. He also contested the applicability of the decision of the Supreme Court in the case of Jacsons Thevara (supra).
21. We have carefully considered the matter which was argued at length in as many as six sittings of the Bench. It is necessary for us to refer to certain important facts before we take up the larger questions of law. We observe from the Bill of Lading that the 12 packages in which the consignment has been imported from Kuwait have been described to contain cranes, excavator, shovel loader, truck, forklift and generators, besides, tools, tackles, etc. The description of these goods in the Bill of Entry is "used and second-hand construction aids machinery, tools, tackles etc." No import licence was produced and clearance was claimed under the OGL and reference was made to Paragraph 213(5) of the Import Policy 1985-88. In the application for registration of the contract, the following mention has been found :-
"We may mention that subject goods are bought by us in Kuwait for execution of overseas project with RBl's approval in terms of the Import Policy, 85-88, paragraph 213(5) and accordingly, no import licence or CCP is required for the clearance of the same and, therefore, the question of separate contract with the foreign supplier does not arise in this case".
22. We also observe that in Column-8 of the form prescribed for registration of contract under Heading 98.01, the words "as attached" have been mentioned against certified copies of contract; no such contract has been produced before us; nor was any such contract found in the case records of the Customs House received by the learned Departmental Representative. As regards the reference to the Import Policy for 1985-88, we observe that paragraphs 212 & 213 relate to Project Exports and it is in relation to the execution of overseas projects by an Indian contractor that there is a provision that such a contractor may buy construction equipment machinery and related spares, tools and accessories for enabling them to execute the projects. After completion of the overseas project, such equipment, machinery and related spares are allowed to be imported into India by the Customs authorities without production of an import licence or a CCP. It is, therefore, clear that the consignment imported by the appellants under this provision relates to an export project undertaken by them and is not, as such, relatable to the type of import covered by Heading 98.01. It may be possible that such an equipment may be capable of being used in a contract awarded to the appellant company, and they may claim the registration of such a contract under the Project Import Regulations. Such a view is further strengthened by the fact that in their application for registration, they have mentioned that they have, at their disposal, necessary erection machinery equipment and other items lying at their overseas project and the same are being imported for use in the initial setting up of the fertilizer project of IFFCO at Aonla. They have also submitted in this application that the use of the imported goods is essential for initial setting up of the fertilizer project. These facts, which have come out from a careful scrutiny of the documents also establish that what the appellants are seeking to do is to make use of certain erection machinery etc. lying at their overseas project and this also explains the absence of a contract for the import of these goods. These facts have an important bearing on the view that we would finally take in the matter.
23. Heading 84.66 provided that the goods should be imported against one or more specific contracts which had been registered with the Customs House in the manner prescribed in the Project (Registration of Contract) Regulations, 1965. In the case of Heading 98.01, a similar provision has been made in Chapter Note 2 which refers to the regulations framed under Section 157 of the Customs Act, 1962. In the new Regulations entitled - Project Imports Regulations, 1986, - the condition of eligibility itself provides for registration of specific contract. It is as under:
"4. Eligibility. - The assessment under the said Heading 98.01 shall be available only to those goods which are imported (whether in one or more consignment) against one or more specific contracts, which have been registered with the appropriate Customs House in the manner specified in Regulation 5 and such contract or contracts has or have been so registered -
(i) before any order is made by the proper officer of Customs permitting the clearance of the goods for home consumption." (Emphasis added)
24. Regulation 5(4) specifically states that every application shall be accompanied by the original deed of contract together with a true copy of the import trade control licence. In Sub-regulation (2) of Regulation 5 there is a provision again for making the application for registration of the contract only after obtaining the import trade control licence, whenever required, for the import of articles covered by the contract.
25. What the appellants have done in this case is to import the erection and other equipment which they had used for setting up a project in Kuwait in accordance with Paragraph 213 of Import Policy (1985-88) relating to Project Exports, and to then make an application to the Custom House for assessment of the equipment under Heading 98.01 at the concessional rate of duty available for project imports without having any contract which, as we have seen, is an indispensable requirement of the law on the subject. This itself would show that in the absence of a specific contract covering the goods required for the initial setting up of the unit, the subject goods do not qualify for assessment under Heading 98.01. Therefore without going into the various other questions raised before the lower authorities as well as in the appeal and before the referring Bench, the claim for assessment under Heading 98.01 fails and the appeal is liable to rejection on this ground alone.
26. Coming now to the various contentions raised before us, the first is that the reference to the present Bench is totally redundant. That such a contention should have been raised before us without any basis is evident from the reading of paragraph-19 of the order of the referring Bench, which has been reproduced in the earlier part of this order. Learned Member (Technical) has expressed the view that a narrow construction of sub-heading 9801.00 as adopted in PSEB's case was not warranted and since he was inclined to take a liberal view, it was necessary that the matter be referred to a Larger Bench for consideration whether the auxiliary equipment in the present case can be extended the benefit of concessional duty. We, therefore, hold that having expressed the view that a liberal construction should be put on sub-heading 9801.00, the Referring Bench had necessarily to refer the matter to the Larger Bench so that the view taken in PSEB's case could be reconsidered. Therefore, the contention of the learned Counsel that reference to the Larger Bench was redundant is rejected. We would also like to say that the decision of the Supreme Court in Paras Laminates case is fully applicable to a situation like the one that has arisen in the present case, where the earlier decision of the Tribunal is perceived by a Bench subsequently dealing with the matter as requiring reconsideration.
27. On the second question that there is complete unanimity among all the three Members that the imported goods are auxiliary equipment, it appears to us on a careful reading of the order written by learned Member (Technical), that he has not considered it necessary to go into this aspect and he has proceeded on the assumption that being construction aids, the goods are auxiliary equipment but because of the appellants' admission that they would be used in a number of projects established at different places, the PSEB's decision would stand in the way of their classification under Heading 98.01.
28. Since the present Bench is to decide the question keeping in view the facts and circumstances of this case, it follows that the Bench has to necessarily look into the facts before deciding the question referred to it. Since this cannot be done in isolation and by disregarding the facts of the case, the approach canvassed by the learned Counsel would put constraints on the Larger Bench going into the facts and circumstances of the case. It is, therefore, necessary for the Larger Bench to look into all facts and in doing so, they have to arrive at their independent conclusion. We are, therefore, unable to accept the contention of the learned Counsel about complete unanimity among the Members of the Bench on the point. After careful examination of the facts, we have seen that in the absence of the contract, the very criteria for eligibility for assessment under Heading 98.01 is not fulfilled and, therefore, whether the goods imported were auxiliary equipment or not becomes totally irrelevant. Moreover, the Referring Bench has only expressed a view saying that the decision of the Tribunal in the PSEB case of taking a narrow view was "perhaps not warranted". This Bench could not have taken a final decision on this point because it was bound by the decision of a Co-ordinate Bench. Once the matter is referred to the Larger Bench, the Larger Bench has to go into the facts and circumstances of the case for a proper and meaningful consideration of the matter.
29. The next question is the learned Counsel's argument that the Department had admitted that the imported goods were to act as an aid in setting up the specified project and the benefit of assessment under Heading 98.01 should not be denied just because the appellants have stated before Collector (Appeals) that if the imported machine is still serviceable, they might make use of the same in some other project. This question has to be considered along with the other question about the condition of the goods at the time of their import and the end-use of the goods. We are unable to accept the contention of Shri Subhedar that the Department arrived at the finding about the nature of the imported goods as an aid in setting up the specified project because none of the lower authorities have gone into this question. The only question that was considered was whether the import of a private contractor was permissible and whether the possibility of the use of the goods elsewhere disentitles them from assessment under Item 98.01. Collector (Appeals) had also considered the question that the imported machinery should actually go into the initial setting up of the unit and should not merely be vised as an aid. In these circumstances, it would not be correct to conclude, as the learned Counsel has done, that the nature of the goods as an aid in setting up the specified project stands admitted by the Department. In this context, the question which has to be decided by us is whether the expression "auxiliary equipment" would cover erection machinery, equipment and other items like, cranes, excavators, Shovel Loaders, trucks, forklifts and generators for assessment under Heading 98.01. The expression auxiliary equipment has not been defined in the Heading. One can draw an inference from the inclusion clause which has been added within brackets in Heading 98.01, according to which, it includes equipment required for research and development and testing and quality control. If even by the inclusion clause the auxiliary equipment is such as is required to be installed within the project site and is, therefore, relatable to whatever activity of manufacture or production etc. takes place within the premises, there is no reason to interpret that the expression "auxiliary equipment" would include the type of equipment and material imported in the present case, which has nothing to do with what is installed at the project site, but is more in the nature of material handling equipment to facilitate the work of erection, construction and maintenance. It can, therefore, be concluded that even the reference to the inclusion clause - a clause which normally extends the scope of a definition - does not lead to the interpretation placed by the learned Counsel on the expression which, in its ordinary meaning, would not cover items which are not connected with the object of manufacture, production, mining and exploration etc. This being so, the interpretation placed by Collector (Appeals) on the expression "auxiliary equipment" would appear to be correct and erection equipment etc. such as the one which has been imported in the present case cannot be covered under Heading 98.01. Further, erection equipment is general purpose equipment and is used for several different projects and neither goes into the initial setting up of the specified project nor to the substantial expansion of a unit of the specified project is, therefore, automatically excluded from the scope of the Heading. We would also have to bear in mind the fact that the appellants' own case is that they have imported the erection machinery for use in the initial setting up of the fertilizer project and the use of the imported goods is essential for the initial setting up of the fertilizer project. The clear distinction between what is used in the initial setting up of the unit and what is required for the purpose has also to be borne in mind. Although the learned Counsel had made the point that their admission before Collector (Appeals) that the possibility of future use of the equipment should not be taken to go against their claim for assessment under Heading 98.01, the fact is that neither the wordings of Heading 98.01 nor the Project Import Regulations conceive of a situation of this nature. This itself is sufficient to show that the machinery, equipment etc. imported under project contract is required to go into the setting up of the unit of a specified industrial plant and other projects mentioned in Heading 98.01. In coming to this conclusion, we are in agreement with the arguments of the learned Departmental Representative on this question and the case law cited by him. In this connection, the observations of the Division Bench of the Madras High Court in the case of Appraiser, Madras Customs (supra) are significant when they refer to the imports assessable under Heading 84.66, as if they form a composite unit. The concept of imports as a composite unit relatable to a specific project cannot include assorted erection equipment capable of being put to use in several different projects and not relatable to a specific project. We, therefore, agree with the learned Departmental Representative that the goods have to be "project specific" for assessment under Heading 98.01.
30. We do not consider it necessary to go into the other contentions placed before us by both the sides for deciding the reference made to us. We have confined ourselves to looking into facts and circumstances of the case to the extent it was necessary to decide the point of reference and, while doing so, we have found that the goods imported do not qualify for assessment under Heading 98.01 because the essential requirement of registration of a contract for classification under that Heading has not been fulfilled in this case.
31. While looking into this aspect, we have come to the conclusion that the appeal itself can be disposed of. We have dealt with the other aspects of the matter only in so far as they are connected to the point of reference to us.
32. Thus, after consideration of all the relevant aspects of the point referred to the Larger Bench, we come to the conclusion that the goods imported in the present case do not qualify for assessment as "auxiliary equipment" and the benefit of concessional duty under Heading 98.01 cannot be extended to them. Consequently, the applicability of the exemption Notification will also not arise. The appeal gets disposed of in answering the reference and is dismissed.
Sd/- Sd/- (N.K. Bajpai) (Harish Chander) Technical Member President 18-2-1993 19-2-1993 S.K. Bhatnagar, Vice President
With due respects to my learned brothers, my opinion and orders in the matter are as follows:-
33. I consider that the Larger Bench is competent to look into all the relevant facts and circumstances which are required to enable it to come to a correct decision, and in this respect I agree with the observations of the Learned Member (Technical), Shri Bajpai.
34. It is pertinent to note in this connection that the reference was ultimately made by the consent of all the Members of the referring Bench; and it has to be answered keeping in view the majority opinion which indicates a full scope reference.
35. I also agree with Shri Bajpai that the reference to the Larger Bench was not redundant.
36. Having said so, I would like to emphasise that in this matter, the application dated 17-3-1986 was filed for registration with reference to the Heading 98.01 in respect of the goods regarding which the bill of entry had been filed on 12-3-1986 and duty was subsequently paid-for before import, on merit assessment of individual items, albeit under protest, and the goods were said to have been cleared on 27th March, 1986.
37. The significance of these dates lies in the fact that the old Tariff Heading 85.66 for project imports was substituted by 98.01 by the Customs Tariff Amendment Act vide Notification No. 30/86; but the old regulations namely the Project Import (Registration of Contract) Regulations, 1965 were replaced by the new Project Import Regulations, 1986 only on 3rd April, 1986 by Notification No. 28/86 dated 3-4-1986.
38. So a question has arisen as to what was the legal position in between 28th February, 1986 and 3rd April, 1986? And this question has assumed significance as the importation has taken place during this interregnum.
39. It is interesting to note in this connection that although the application for registration dated 17-3-1986 has been filed with reference to the new Heading 98.01 but the appellants, in their appeal memo as well as in their initial arguments, have repeatedly referred to Notification No. 72/85, the Public Notice No. 346/37/85/TRV dated 29-5-1985 and the letter of the Director of Industries, issued with reference to the old Heading 84.66.
40(i) It is also worth noting that Project Imports Regulations, 1986 were issued in supersession of the earlier Project Import (Registration of Contract) Regulations, 1965 "except as respect things done or omitted to be done before such suppression".
40(ii) And the learned DR has stated that although Heading 98.01 had come on the statute book on 28th February, 1986, it became operative only with effect from 3rd April, 1986, the date from which the Project Import Regulations, 1986 came into force in view of Chapter Note 2 which refers to these regulations and states that:
"Heading No. 98.01 is to be taken to apply to all goods which are imported in accordance with the regulations made under Section 157 of the Customs Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations".
41. I observe in this connection that in the case before us, apart from the application dated 17th March, 1986 for registration being under Heading 98.01, the order-in-original and order-in-appeal have also been passed with reference to 98.01; and in the appeal memo the appellants have also sought classification only under initial reliance was sought to be placed by the Ld. Advocate on a Public Notice issued with reference to the earlier provisions, but the pleadings were subsequently addressed by him mainly with reference to 98.01 and the new Project Import Regulations, 1986. Not only that, the Referring Bench has also considered the case with reference to 98.01; And, the arguments have been advanced by DR with reference to 98.01 and the New Regulations (in addition to his plea that 98.01 became operational only with effect from 3rd April, 1986).
42. Having observed as above, I consider that the date of coming into force of the new Import Regulations, 1986 was material for the purpose of the present case as the question of maintainability of the petitioner's application for Registration is linked with it. In this respect I observe that the new Project Imports Regulations, 1986 were dated 3-4-1986 (and had not been given a retrospective effect). Therefore, the application filed on 17-3-1986 i.e. before this date, was not maintainable.
43. That apart, even if the new regulations were held to be governing the present case, there was nothing therein to warrant the presumption that the Contract referred to in the Clauses 4, 5 and 6 thereof was, by necessary implications or otherwise, a contract, (for import of the goods) only with a foreigner or a party located abroad.
44. In my opinion the eligibility clause 4 (consequently other clauses) would cover importation against one or more specific contracts for initial setting up or substantial expansion of a plant or project in India i.e. a contract between the importer and the Project authorities as well. Hence in my opinion the absence of a contract with a foreigner or a party located abroad would not come in the way of grant of this benefit if the importer was otherwise entitled to it. Similarly, the fact that the importer was a contractor or a private contractor could not bar the extension of the benefit under these provisions if otherwise due.
45. In so far as the present case is concerned, I note that the appellants have submitted all along that they were importing their own goods from abroad for initial setting up of a fertilizer project of I.F.F.C.O. in India and that they had been entrusted with this execution of a contract for initial setting up of an Ammonia storage package unit and co-generation plant of IFFCO being installed at Aonla, U.P.
46. They have mentioned about it in their application for registration dated 17-3-1986 as well as before the adjudicating and appellate authorities below as also in the hearing before us. Actually this fact is not in dispute at all; not only that the Asstt. Collector has himself described the appellants in his order-in-original as 'private contractor' who has been entrusted with the execution of the contract and Collector (Appeals) has also described them only as a 'Contractor'.
47. The learned DR has also not contested this fact. Hence I do not attach much importance to the fact that the appellants or the DR have not been able to show us the contract, said to have been attached with the application, at this stage. Not only that if, this was the only hitch it would as best result in remand (with suitable directions) and would, in my opinion, not call for a rejection on this ground alone.
48. I am also not inclined to take serious note of references to the older provisions of 84.66 and the Public Notices related to the old Notification for it is to be kept in view that this importation per chance took place in the interregnum when the old provisions were being replaced by new provisions i.e. the time between the old and new ones, (and the Notification No. 72/85-Cus., dated 17-3-1985 had been amended from time to time). As such there was some scope for confusion.
49. I am, however, unable to accept the plea of the learned advocate with reference to this Notification as (even otherwise) it was an exemption notification issued under Section 25(1) of Cus. 62 in public interest and not a notification issued under Heading 98.01 which was required to be shown for claiming benefit in terms of 98.01 (6).
50. As a matter of fact, the Government had issued several notifications under corresponding sub-heading of old Heading 84.66 and it was required to be shown whether similarly any notifications covering fertilizer projects were issued under Heading 98.01; but the same has not been done. In fact, the Government have issued notifications under 98.01(6) also such as 110/86 but fertilizer project is not one of the projects specified therein. Therefore, these goods which have been admittedly imported for a fertilizer project could not be given the benefit of 98.01(6) even if the argument of the appellants that the said heading was not only on the statute Book but in full force at the time of importation, was accepted.
51. In view of my observations as above, the appeal would fail on these counts and it was a question arises whether it was necessary to go into other aspects? I consider that it was necessary to consider the following aspects as well before parting.
That at the time of importation the bill of entry was filed for merit assessment of individual items and after such an assessment the goods were cleared on payment of duty, albeit under protest.
The application for registration under 98.01 was subsequently rejected by Asstt. Collector. As such the Customs Officers had no occasion or reason to examine the goods from the angle of the ingredients of Heading 98.01. In other words, whether the goods in question were auxiliary equipments or goods of other type covered or not covered by the description under the Heading 98.01 was not determined at the time of examination of the goods for assessment and clearance thereof.
52. A perusal of the orders of referring Bench also shows that no specific finding was recorded regarding the auxiliary character or otherwise of the items and their admissibility on merits.
52A. As regards the Tribunal's order in the case of PSEB to which the referring Bench as well as both the sides have drawn our attention, it is necessary to take note of the following.
(1) The first point to be kept in mind is that this judgment has been passed with reference to the old Heading 84.66.
(2) Secondly, with due respects to the Bench, the articles "a" and "an" contained in the expressions relating to the initial setting up of "a unit" or the substantial expansion of "an existing unit" of "a" specified project were required to be construed keeping in view the principles of interpretation of such words and expressions.
53. According to Maxwell's "The Interpretation of Statutes', (12th edition by P. St. J. Langan) "Rules as to gender and number By Section 1(1) of the Interpretation Act, 1889, in every Act passed after the year 1850, "unless the contrary intention appears, (a) words importing the masculine gender shall include females; and (b) words in the singular shall include the plural, and words in the plural shall include the singular."
This provision, and particularly paragraph (b), is frequently applied by the courts. The difficulty to which it gives rise is: when precisely does an Act manifest a "contrary intention"? In a case which dealt with the corresponding provisions of the Interpretation Ordinance of Hong Kong, Lord Pearce approved the statement of Sir Michael Hogan C.J. that: 'To discover whether a contrary intention is implied one must, I think, look, not at the form of particular expressions, but at the substance and tenor of the legislation as a whole."
54. In other words such letters, words and expressions allowed room for a more liberal construction depending upon the context with reference to which they were employed and the main purpose of the provision in which they occurred; and it is apparently this possibility which has caused this reference; And the referring Bench (by virtue of Hon'ble Member (T) - Shri Jain's observations) has in particular indicated this possibility and sought Larger Bench's opinion precisely on this point. Therefore, I am of the opinion that, it was necessary on the part of the Larger Bench to record its observations with reference to this preposition.
55. In this respect I consider that great emphasis was required to be placed on the word 'specified project' i.e. it was required to be seen whether the project or plant with reference to which the goods were being imported is specified in the Heading 98.01 or a notification issued under that heading. Once this basic requirement is met then it was immaterial whether the imported goods were used in or in relation to any one or more than one of the units of such specified project(s) or plant(s); and it was also immaterial whether such a unit or units (whether in existence or proposed) were located at one or different places.
56. The basic idea or intention behind the import project appeared to me to extend the benefit of concessional rate of duty in respect of the type of machinery and equipment and material etc. specified in the heading, if imported for the purpose of initial setting up of a unit or the substantial expansion of an existing unit of any one or more of the specified projects. Hence in my opinion, once the Customs were satisfied on this score, they were required to extend the benefit to the imported goods irrespective of whether they were used in one or more of such specified projects or unit(s) thereof (whether existing or proposed). Even otherwise the Customs were not normally concerned with as to what happens once the goods had been cleared and even in those cases in which the 'end-use' condition was built-in, the Customs were required to only see that the condition was fulfilled by actual use for declared purpose but once the goods had been so used what happens thereafter was not a matter of concern for the Customs i.e. after they had been put to declared use whether they were retained by the importer or sold, given on hire, (or just put to some other use or just given away to a Kabadiwala for that matter) was the importer's own concern and not that of the Customs.
57. With the recent advances in technology, it is possible to manufacture such good quality machinery and equipment etc. or such refined material or tools which could be put to repeated use and there is nothing to show that Heading 98.01 (or its predecessor 84.66 for that matter) barred any such use. Hence in my opinion the benefit could not be denied to the appellants merely on the ground that they had stated that the machinery and equipment etc. imported for use in the fertilisers project was capable of being used for other projects and they intended to put it to such a use.
58. In other words, this fact by itself could not deprive the importer of a benefit otherwise due; but the difficulty in the present case lies elsewhere, in as much as, the appellants have not been able to show that the fertilizer project was one of the projects, specified under 98.01 or any of the notifications issued thereunder. Since this basic requirement has not been met, therefore, even if the importation was otherwise governed by 98.01 and the new Projects Imports Regulations, 1986, the goods in question would not be entitled to the benefit of assessment at concessional rate of duty provided therein.
59. In view of these observations and findings I agree with Hon'ble Member (T-Shri N.K. Bajpai), although on different grounds and for different reasons, that the appeal is liable to be rejected. I also agree that the appeal gets disposed of in answering the references and stands dismissed.
K.S. Venkataramani, Member (T)
60. I have had the benefit of going through the orders recorded by learned Member (Technical) Shri Bajpai concurred with by the Hon'ble President as well as the order recorded by Hon'ble Vice President. My view is that the existence of a contract for the import of the consignments and the registration thereof in the Custom House prior to clearance is a SINE QUA NON for classification under Heading 98.01 CTA as has been brought out by learned Member (Technical) Shri Bajpai in his order. The Madras High Court decision relied upon by him and quoted at P-14 of his order clearly indicates this and in para-8 of the decision the High Court has also cited the rationale behind the creation of the erstwhile Heading 84.66 by quoting from the Finance Minister's speech explaining the background for introducing this item in the Tariff as follows:
"There have been complaints that the import of equipment by project is impleaded as a result of meticulous assessment at the appropriate rates of each constituent item required for setting up the project. I now propose to introduce a new tariff item to cover the import of equipment needed for the initial setting up of new projects or for undertaking substantial expansion of existing projects in the fields of industry, power, mining and prospecting for minerals or oil. Not only complete consignment but also component parts and raw materials imported specifically for fabricating equipment within India, for a project and some quantity of initial stock of spare parts and other stores needed for the maintenance of the project can be imported under this item. The contract or contracts would have to be registered in advance with the Customs authorities and a provisional assessment will be made immediately obviating to the maximum possible extent the need for detailed assessment of individual lots, after the goods arrive. The equipment is imported under the item will be charged to duty at the machinery rate... ."
In the present case there is admittedly no such contract. It may also be relevant to recall the Bombay High Court decision in the case of Subhash Photographics v. UOI - 1992 (62) E.L.T. 270 wherein it has been held in Para 14, "It has further been made clear that this Heading (98.01) would apply only to such goods which are imported in accordance with such regulations. (Reference is to Project Import Regulations). In such a situation Heading 98.01 has to be read with Regulations framed under Section 157 of the Customs Act." In this view of the matter I agree with the conclusion reached by learned Member (Technical), the President, and the Vice President that the goods imported in this case will not fall for classification under Heading 98.01 CTA and the appeal be therefore rejected.
G.P. Agarwal, Member (J)
61. I have had the advantage of going through the Order proposed by my learned brother, Shri N.K. Bajpai, Technical Member (as he then was) and concurred by the other learned Members on the Bench. I agree with S/Sh K.S. Venkataramani and N.K. Bajpai, learned brothers, that the existence of a contract for the import of the consignments and the registration thereof in the Custom House prior to clearance is a SINE QUA NON for classification under Heading 98.01 CTA. Accordingly, I too hold that the goods imported in the present case do not qualify for assessment as "auxiliary equipment" and, therefore, the benefit of concessional duty under Heading 98.01 cannot be extended to them. Consequently, the appeal is dismissed.