Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Customs vs E.I.D. Parry (I) Ltd. on 23 December, 1997
Equivalent citations: 1998(100)ELT275(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to grant of benefit of assessment of the pipelines and pipeline manifolds under Project Import Regulations under T.H. 98.01.
2. The ld. lower appellate authority has allowed this benefit to the respondents.
3. The ld. JDR for the department has pleaded that the pipeline is used for the transmission of Ammonia from the offshore to the tanks in the Respondents' factory. He has pleaded that the laying of the pipeline to the appellants' (sic-should be Respondents') factory from the shoreline cannot be considered as substantial expansion of the appellants' (sic) plant. He has pleaded that the pipelines were outside the factory. He has pleaded that the issue has to be decided in the context of the definition "Industrial Plant" as set out in the Project Import Regulations. He has pleaded that the goods which are covered under T.H. 98.01 have to conform to the description as set out under 98.01 read with Note 2 of Chapter 98. According to this the Heading 98.01 is to be taken cover the goods which are imported in accordance with the Regulations made under Section 157 of the Customs Act, 1962 and the expressions used in this heading shall have the meaning assigned to them in the said regulations. He pointed out that the goods as covered have to answer to the use in the Industrial Plant or for expansion thereof. He, in this connection, referred us to the definition of the Industrial Plant as set out in the Project Import Regulations, 1986 and also to the terms of substantial expansion as set out in the definition and the same are reproduced for convenience of reference as under :-
3. Definitions. - For the purposes of these regulations, -
(a) "industrial plants" means an industrial system designed to be employed directly in the performance of any process or series of processes necessary for manufacture, production or extraction of a commodity, but does not include -
(i) establishments designed to offer services of any description such as hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops; or
(ii) a single machine or a composite machine, within the meaning assigned to it, in Notes 3 and 4 to Section XVI of the said First Schedule;
(b) "substantial expansion" means an expansion which will increase the existing installed capacity by not less than 25 per cent;
(c) "unit" means any self-contained portion of an industrial plant or any self-contained portion of a project specified under the said Heading No. 98.01 and having an independent function in the execution of the said project.
4. He has pleaded as could be seen from the definition the Industrial System has to be such which is directly employed in the performance of any process or series of processes necessary for manufacture, production or extraction and the term 'substantial expansion' means expansion of which will increase the existing installed capacity by not less than 25 per cent.
5. He has pleaded the pipeline is used only for the transmission of the Ammonia and has nothing to do with the processing of the materials or in the series of processes necessary for manufacture or production of the goods in the respondents's unit. He, in this connection, referred us to the decision in the case of National Aluminium Co. Ltd. v. CC, Madras reported in 1997 (94) E.L.T. 409 (Tribunal) (Larger Bench) and stated that in that case the post facility Alumina conveying system intended for unloading of the raw materials and loading of finished products are not taken to be covered by the Project Import Regulations under the then T.H. 84.66 and he referred us to para 12 of the said judgment which is produced below for convenience of reference :-
12. In Project Imports Regulations, 1986, the expression "industrial plants" has been defined as an industrial system designed to be employed directly in the performance of any process or series of processes necessary for manufacture, production or extraction of a commodity. The definition excludes establishments designed to offer services such a hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops and a single machine or a composite machine within the meaning .assigned to it in Notes 3 and 4 to Section XVI of the First Schedule. 'Unit' has been defined a self-contained portion of an industrial plant or of a project specified under Heading 98.01 and having an independent function in the execution of such project. New Regulations also require an application to be made containing various particulars and supported by various documents as stipulated in the old Regulations. Clauses (5) and (6) of 1986 Regulations also enable proper officer to register the contract on being satisfied that the application is in order. In other words broad scheme of the 1965 Regulations has been followed in 1986 Regulations except that the latter contains definition of industrial plants making it clear that Plant takes in only system employed directly in the performance of any process necessary for manufacture, production or extraction of a commodity. The definition would clearly exclude port facility as in the case at hand. The definition incorporated in the 1986 Regulations appears to be only by way of clarification since doubts had arisen under the 1965 Regulations. Absence of definition in 1965 Regulations cannot be of any assistance to the appellant. Regulations have to be read subject to Chapter Heading 84.66 and we have already indicated that port facility intended for unloading raw materials and loading finished products cannot come under Item (i)(D)(1) of Heading 84.66.
6. He also referred us to the decision of the Tribunal in the case of CC v. TNEB under which the benefit of assessment was denied under T.H. 98.01 in respect of equipments for transmission of electricity wherein the Tribunal has held that the scope of T.H. 98.01 has to be read along with Project Import Regulations, 1986. He has pleaded the pipeline used for transmission of Ammonia to the Respondents' factory could not be taken to be covered by the definition Industrial Plant as set out under the Project Import Regulations, 1986. He, therefore, urged that the ld. lower authority's order is not sustainable in law.
7. The ld. Senior Advocate, Shri Sundaram appearing for the Respondents has referred us to the T.H. 98.01 description contained therein and pleaded that the items which are covered under this heading has to be set as for the industrial plant are the things required for industrial plant. The T.H. 98.01 is reproduced below for convenience of reference :-
98.01 9801.00 All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit,. or the substantial expansion of an existing unit, of a specified:
(1) industrial plant, (2) irrigation project, (3) power project, (4) mining project, (5) project for the exploration for oil or other minerals, and (6) such other projects as the Central Government may, having regard to the economic development of the country notify in the Official Gazette in this behalf;
and spare parts, other raw materials (including semifinished material) or consumable stores not exceeding 10% of the value of the goods specified above provided that such spare parts, raw materials or consumable stores are essential for the maintenance of the plant or project mentioned in 1 to 6 above.
He has pleaded that the description of the items under T.H. 98.01 clearly goes to show that the items as are covered under this heading are industrial plant and things required for the same. He highlighted the fact that what is covered in the definition of Industrial Plant is the industrial system and items required . for setting-up of the same or expansion of the same and these have to be taken to be covered under T.H. 98.01.
8. He has pleaded that what is required for substantial expansion has to be decided by the concerned Ministry i.e. by the authority charged with the responsibility for the purpose. He has pleaded in the present case, the concerned Ministry had certified that the goods in question were required for substantial expansion. He has pleaded that the fact regarding use of the material imported for the industrial plant having been certified, the Customs authorities could not reopen the same issue. In this connection, he referred us to the Regulations 5(2) of the Project Import Regulations which is reproduced below for convenience of reference :-
(2) The importer shall apply, as soon as may be, after he has obtained the import trade control licence wherever required for the import of articles covered by the contract and in case of imports covered by the Open General Licence or imports made by Central Government, any State Government, statutory corporation, public body or Government undertaking, run as a joint stock company (hereinafter referred to as "Government Agency") as soon as clearance from the [Concerned, Administrative Ministry or Department], as the case may be, has been obtained.
9. He has pleaded that under this Regulations, the concerned Administrative Ministry is required to give clearance before the importation could be made under the Project Import Regulations. In the present case, he has pleaded that this was done and all that the Customs authorities were required to see was that the permission in the requisite form had been obtained and thereafter to extend concession under T.H. 98.01. Once sponsoring authority i.e. the concerned Ministry had stated that the equipment was for substantial expansion the Customs authority could not go into this aspect.
10. He, in this connection referred us to the page 70 of the Paper Book wherein the Collector of Customs, Madras had been addressed by the Ministry vide letter No. 136/1/94-FDD/I/Proj. III, dated 16-2-1996 to say that the M/s. EID Parry (India) Ltd., Chennai, the Respondents herein had proposed to import the equipment for setting-up of offshore Alumina unloading facility under substantial expansion of their factory and that the competent officer had attested the list of the goods and stated that the appellants are entitled to benefit of Notification No. 90/94, dated 1-3-1994.
11. He also referred us to the judgment which has been relied upon by the ld. JDR in the case reported in 1997 (94) E.L.T. 409 and referred to para 2. He has pleaded that it was open to the department, to show that the certificate produced was wrong and it was only onus of the department to show that the equipments were not required for substantial expansion. He also in this connection referred us to the judgment in the case of CC v. Rajasthan Chemicals reported in 1991 (55) E.L.T. 444. In that case, the issue related to Central Excise Notification No. 179/77 which was available in respect of goods falling under T.H. 68. In the manufacture of which no process was ordinarily carried out with the aid of power. He also referred to paras 12,13,14,16,21 and 22 in the judgment. He pleaded that in that case the Hon'ble Supreme Court took note of the fact that in the manufacture of salt, series of processes were involved and that in relation to the manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations and after taking into consideration the meaning of the term process and handling of the material was considered by the Hon'ble Supreme Court as a "process" and that any activity which was essential for production of different articles has been held by the Supreme Court as the "process". In this background, he has pleaded that the transmission of Ammonia from the offshore to the respondents' factory should be considered as a "process" for the manufacture of the goods by the respondents.
12. The ld. JDR for the department pleaded that for assessment purposes, the competent authority was the Assistant Collector and has pleaded that in the definition of Industrial Plant, the restricted meaning has been given to the term "Industrial Plant", covering an industrial system designed to be employed directly in the performance of any process or series of process necessary for manufacture of the goods. He has pleaded that the industrial system has to be geographically confined to certain area and in the case of Rajasthan Chemicals cited by ld. Advocate reported in 1991 (55) E.L.T. 444, the handling of the materials was within the factory and it was in that context the Hon'ble Supreme Court held that the process of handling was also a process of manufacture. In the present case, he pleaded, the pipeline system is outside the factory and it had no nexus with the process carried out in the respondents' plant. He pleaded that the ratio of the decision of Larger Bench would clearly apply to the facts of this case. The letter of the sponsoring authority as has been cited by the ld. Advocate was received after the adjudication by the Assistant Collector was done and it can only be considered as recommendatory. He has pleaded that the plea of the respondents that since the tank was considered as part of the substantial expansion and benefit of assessment under T.H. 98.01 had been allowed in that case would not be a relevant consideration for claiming benefit in the case of pipeline system as the tanks were located within the appellants' plant while the pipeline, in this case, is located outside the plant.
13. We have considered the submissions. We observe that the issue has to be decided in the context of definition of industrial plant as set out in the Project Import Regulations. What is envisaged in the definition is that it should be an industrial system designed to be employed directly in the process or in the series of processes necessary for manufacture or production. The respondents' unit as such is the self-contained unit and as the tank and other equipments so integrated for the production in the project for which the industrial system is designed. The ammonia is an input and it has to be brought into the factory for being put into the manufacturing stream. What the respondents seek is that the process of bringing the goods to the plant should be treated as part of the plant and therefore the installation of the same should be considered as substantial expansion. The item as covered in the tariff under Heading 98.01 is Industrial Plant.
14. The term 'plant' as defined in the Venkataramaiya's Law Lexicon & Legal Maxims Dictionary 2nd Edition is as under :-
In common parlance the word "plant" includes within its ambit of buildings and equipments used for manufacturing purpose. Section 43(3) of the Income-tax Act, 1961, gives an inclusive definition of the expression plant in these words : "plant" includes ships, vehicles, books, scientific apparatus and equipment used for purposes of business of profession".
15. In the Shorter Oxford English Dictionary, the term PLANT is defined as under :-
"The fixtures, implements, machinery, and apparatus used in carrying on any industrial process."
16. In the Webster's New Collegiate Dictionary, the term 'plant' is defined as under:
(a) "The land, buildings, machinery, apparatus, and fixtures employed in carrying on a trade or an industrial business".
(b) a factory or workshop for the manufacture of a particular product."
17. From this, it would appear that the term "Industrial plant" as are used in the tariff which has been employed in the Project Import Regulations as the industrial system has to be something which is located within certain geographical parameters and the equipments employed therein have to be taken to be constituting industrial plant or the industrial system. In view of the above therefore what is to be seen is whether the pipeline system which feeds ammonia to the respondents' unit could be considered as part of the industrial plant and the installation thereof as substantial expansion of the plant. We had asked the ld. Senior Advocate as to the mode of transmission of ammonia to the respondent's unit prior to installation of the pipeline. It was clarified that the same was brought by tankers etc. It was fairly conceded that no claim could be made in respect of the tankers as being a part of the industrial plant for the benefit of assessment under T.H. 98.01. The respondents have cited the judgment of Hon'ble Supreme Court in the case of Rajasthan Chemicals cited supra where the process of manufacture was considered by the Hon'ble Supreme Court as was carried out within the factory of production and once the process which was carried out in an integrated manner the use of the power with reference to handling of the materials was considered as relevant and the same was considered as "process". This brings us to the point where the process of manufacture starts and where it ends. This is necessary to consider the definition of the Industrial Plant as set out under the Project Import Regulations and its germane for consideration of the assessment under T.H. 98.01.
18. It is seen that the industrial system for the coverage under this item has to be such which is directly employed in the performance of any process or series of process necessary for the manufacture of the goods. The process of manufacture of the goods has to be taken to have a beginning and also have an end. Where does manufacture starts and where it ends depends upon the integrality of the operations for the manufacture of the goods as are carried out. In our view, the process of manufacture starts with the feeding of the raw materials into the manufacturing stream and if the preparatory processes are done to make the raw materials ready and if these are carried out within the factory, even those processes could be taken to be covered within the ambit of manufacturing process, so long as those processes are taken to be integrated with the processes which are covered within the unit for the manufacture of the goods. Bringing in of the material into the factory, in our view, cannot be considered as process. In our view processes anything done or equipment installed for bringing the raw material inside the factory cannot be taken to be integral to the manufacturing process. The ratio of decision of the Larger Bench as relied upon by that ld. JDR, in our view, is applicable to the facts of this case and the Larger Bench in the case of National Aluminium Co. Ltd. reported in 1997 (94) E.L.T. 409 has held that port facility could not be taken to be covered within the ambit of Project Import Regulations for assessment under the then T.H. 84.66. The finding of the Tribunal at para 12 has already been reproduced above and following this ratio of the decision, we hold that the respondents could not be entitled to the benefit of assessment under T.H. 98.01.
19. The ld. Senior Advocate has stated that the concerned Ministry had certified that the goods in question were required for the substantial expansion and therefore the Customs authority could not question the same.
20. We observe the interpretation of the Customs Tariff lies within the province of Customs authorities and it is for them to determine taking into consideration the description as set out under a particular Tariff Heading whether a particular category of goods qualify for assessment under that heading. The certification by the concerned Ministry while it is a pre-requisite, it cannot be taken be a determinative of assessment under T.H. 98.01 as T.H. 98.01 has to be interpretated on its own terms taking into consideration the nature of the goods imported by the importer.
21. We, therefore, hold that the ld. lower authority was in error in having allowed the benefit to the respondents of assessment under T.H. 98.01 and we set aside the order of ld. lower appellate authority and allow the appeal of the department.