Customs, Excise and Gold Tribunal - Mumbai
Shiv-Vani Oil And Gas Exploration ... vs Commissioner Of Customs on 12 April, 2007
Equivalent citations: 2007(118)ECC306, 2007ECR306(TRI.-MUMBAI)
ORDER
1. The appellants are engaged in manufacture of oil and exploration services and were awarded contract on behalf of ONGC for drilling, completion and testing of pilot oil wells in coal bed methane blocks of Jharia, Bokaro and North Kanpur. For the purpose of undertaking the drilling operations, the appellants had placed a purchase order with M/s. Regent Asia FSE, Dubai, for import of two numbers of Caterpilla-engines, model CAT 3408 and imported the same into India. These engines were second hand engines. The appellants claimed the same to be capital goods entitled for exemption under Sr. No. 218 of Notification No. 21/2002-Cus. However, the Commissioner held that engines cannot be treated as capital goods and therefore cannot be imported into India without a valid licence. He accordingly confiscated the engines and allowed the same on payment of redemption fine of Rs. 15 lakhs and also imposed penalty of Rs. 5 lakhs on the appellants under Section 112 (a) of Customs Act, 1962.
2. The learned Advocate for the appellants submits that the capital goods are defined in the Foreign Trade Policy 2004-2009 in para 9.12. It states as under:
Para 9.12. "Capital goods" mean any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernization, technological upgradtion or expansion. Capital goods also include packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in the services sector.
3. It was submitted that engines are heavy duty engines used for drilling purposes and not automobile engines as has been assumed by the department. The engines are used for operating drilling rig for mining oil and gas. The engines in question are therefore used either directly or indirectly and hence satisfy the definition of capital goods contained in the Foreign Trade Policy. As per the definition, capital goods includes, plant, machine, machinery, equipment, or accessories required for manufacture.... It was submitted that at best the engines can be considered as part of rig and when accessories are considered as capital goods, parts stand on a higher footing and therefore they have to be considered as capital goods within the meaning of para of 9.12 of Foreign Trade Policy. In alternate, it was submitted that the engines can be considered both as plant and machinery. It was submitted that the word 'plant' is not defined in the Foreign Trade Policy but the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Taj Mahal Hotel held that the sanitary and pipeline fittings of hotel would fall within the expression 'plant'. Similarly, in the case of Scientific Engineering House Pvt. Ltd. v. Commissioner of Income-tax it has been held that "drawings, designs, charts, plans are 'plant are capital goods and it has been further observed that "plant in its ordinary sense, includes whatever apparatus is used by a businessman for carrying on his business, not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business." In view of this, it was submitted that the engine which is not meant to be stock-in-trade, has to be considered as plant. Reference was also invited to the dictionary meaning of the machine, where in the Chambers Dictionary, the machine has been mentioned as an engine; and engine powered vehicle, etc. Thus, when an engine is considered as machine it has to be treated as capital goods and therefore the item cannot be considered as restricted item requiring licence for its import. He refers to the decision of the Tribunal in the case of Wartsila India Limited v. CC, Mumbai where the engines have been considered as capital goods. As regards Commissioner's reference to the Tribunal's decision in the case of Khurana Exports v. CC, Pune 2004 (177) ELT 431 (Tri. Mum) and La Grande Projects Limited v. CC, Indore-2005 (192) ELT 874 (Tri.Del.), it was submitted that these relate to automobile engines and cannot be compared with the present engines under import.
4. The learned SDR, however, submits that the definition of the capital goods is given in Foreign Trade Policy and if the definition refers only to accessories and not parts, it has to be considered that it was a conscious omission as otherwise definition would have included parts also and therefore the scope of the definition cannot be expanded to include pans merely because accessories are also included. It was submitted that the decisions of the Apex Court relate to Income-tax Act and Employees Liabilities Act, which are on different footing and given in the background of circumstances dealt with under those provisions. However, in the present case, once the definition of capital goods is given in the Foreign Trade Policy, we cannot import the definition of plant in the given case relating to Income-tax Act and Employees Liabilities Act. Since the engines by itself cannot be used for producing, manufacturing, etc. they cannot be considered as capital goods. The decisions of the Tribunal in the case of Khurana Exports v. CC, Pune 2004 (177) ELT 431 (Tri. Mum) and La Grande Projects Limited v. CC, Indore 2005 (192) ELT 874 (Tri.Del.) cited supra are specific and therefore cannot be disregarded.
5. We have considered the submissions. We find that the capital goods have been defined in the Foreign Trade Policy and therefore there is no need of going by the meaning of the word 'plant', etc. given by the Apex Court in Income-tax Act and Employees Liabilities Act, etc. The capital goods for the purpose of Foreign Trade Policy are the one required for manufacture, production, packaging, etc. unlike the Income-tax Act and Employees Liability Act which treats plant as anything which is not meant for stock-in-trade and is required for permanent use. Further if plant would include everything which is not meant for stock-in-trade, then there was no need to define capital goods so elaborately as to include all the expressions, plant, machine, machinery, equipment, etc. Similarly, the dictionary meaning of the word 'machine' cannot be employed in the present case. The Tribunal's decision in the case of Wartsila India Limited v. CC, Mumbai cited supra is also not applicable as the Bench was nowhere required to determine as what is to be considered as capital goods but has only held that the electricity has to be considered as goods only. The decisions of the Tribunal in the case of Khurana Exports v. CC, Pune and La Grande Projects Limited v. CC, Indore are squarely applicable in the present case as in those cases diesel engines have been specifically held as not being capital goods. In view of the same, we find no merit in the appeal and accordingly reject the same.
(pronounced in court)