Customs, Excise and Gold Tribunal - Delhi
Jindal Strips Ltd. vs Collector Of Customs on 30 May, 1997
Equivalent citations: 1997ECR98(TRI.-DELHI), 1997(94)ELT234(TRI-DEL)
ORDER U.L. Bhat, J. (President) 1. Appellant has come up before this Larger Bench on a reference by a two-Member Bench of the Tribunal. 2. Appellant imported a consignment of "Refractory Bricks for Industrial furnace temperature 1760°C" of USA origin from USA and submitted Bill of Entry dated 24-6-1992 in respect of goods under Tariff sub-heading 6902.10 and sought clearance on payment of concessional rate of duty under Notification No. 77/90, dated 20-3-1990. The Notification exempted Refractory Bricks of special shape or quantity for use as component parts of industrial furnaces falling under Chapter 69 of the Tariff from so much of that portion of the customs duty leviable thereon as is in excess of 40% ad valorem. This notification was the successor notification issued in replacement of earlier Notification No. 246/76, dated 2-8-1976. On 29-7-1990, the Collector of Customs passed an order holding that the consignment was not entitled to the benefit of Notification No. 77/90 on the ground that the appellant's furnaces are not industrial furnaces and holding that the declaration filed to the effect that the consignment was intended for use as component part of "Industrial Electric Arc Furnace" was factually incorrect and the converter of appellant was not "Electric Arc Furnace." The Collector also observed that if the goods are to be used in "Industrial Electric Furnace" as claimed, the benefit of the Notification would be available. Accordingly he ordered confiscation of the goods valued at Rs. 30,86,459.00 under Section 111(m) of the Customs Act, 1962 (for short, the Act) but allowing redemption on payment of fine of Rs. 8 lakhs and allowing release on payment of appropriate duty without allowing the benefit of the Notification No. 77/90. He also imposed penalty of Rs. 5 lakhs under Section 112(a)(ii) of the Act. 3. On appeal by the importer, the Tribunal reversed the finding of the Collector holding that the converters of appellant are a type of Industrial Furnace, set aside the order and remanded the case for examination whether the imported Refractory Bricks can be said to be for use as component parts of Industrial Furnaces and for decision afresh as to the applicability of Notification No. 77/90. Penalty imposed was set aside. 4. After remand, the Collector held that admittedly the goods had been imported for use as replacement in Industrial Furnace (converter) and not for use in the initial construction of Industrial Furnace, that though the goods are Refractory Bricks of special shape and quality with capacity to withstand temperature up to 1760°C being replacement parts they can be regarded only as "spares" and not "component" parts, that the expression "component" is not used for an article intended for replacement of a defective or worn out part and the notification will apply only if the imported goods are intended for initial setting up of Furnace. Accordingly the claim for benefit of Notification was rejected. It is this order which is challenged in the present appeal. 5. The two-Member Bench which heard the appeal noticing conflicting decisions of the Tribunal on the question arising in the case and further noticing the reference of two other appeals to Larger Bench, referred this appeal to a Larger Bench to resolve the following questions :- (i) Whether the phrase "component parts" occurring in Notification 77/90 would cover "spare parts" for the purpose of granting of benefit thereunder? (ii) Relief. 6. We have heard Shri D.N. Mehta, Advocate for appellant and Shri D.S. Negi, SDR for respondent. We also informed the counsel appearing in similar references and other counsel interested in the question to address arguments. Shri V. Sridharan, Advocate and Shri Ravindra Narayan, Advocate have made submissions before us. 7. We will now refer to the decisions of the Tribunal reflecting conflict of view. The earliest decision is in Vaz Forwarding Pvt. Ltd. v. Collector of Customs -1989 (43) E.L.T. 358 (Tribunal). The goods imported were spare parts of wireless apparatus (Radar). Notification No. 284/76 exempted wireless apparatus and "component parts" of such apparatus. The three-Member Bench attached significance to the expression "component" and indicated that if it was the intention to exempt parts used for initial assembly as well as parts imported later for replacement, the Notification should not have used the word "component" and should have really mentioned "parts" and held that only the parts used in the initial assembly or manufacture of machine would be called "component parts", whereas the same parts imported for subsequent replacement of parts of initial assembly have to be considered "spare parts". Accordingly it was held that parts imported for replacement are spare parts and do not attract the operation of the Notification. In Metal Impacts Pvt. Ltd. v. Collector of Customs - 1993 (64) E.L.T. 286 (Tribunal), a two-Member Bench had to consider the applicability of Notification No. 156/86 which granted exemption to "component parts of machine tools for working on metals falling under Heading 84.66." The Bench distinguished the decision in Vaz forwarding Pvt. Ltd. -1989 (43) E.L.T. 358 (Tribunal) stating that Notification No. 284/76 gave exemption to wireless apparatus and component parts thereof and the concessional rate for component parts was not in isolation by itself but was in conjunction with the wireless apparatus and the Notification No. 156/86 extended benefit to "component parts" of machine tools for working metals, mentioning component parts in isolation and not in conjunction with machine tools. The Bench held that under the scheme of Notification No. 186/86, there was no difference between "component parts" and "spare parts" and benefit of the Notification would be extended to parts used as spares also, provided they fall under Tariff Heading 84.66. In Hindustan Sanitaryware and Industries Ltd. v. Collector of Customs - 1993 (66) E.L.T. 683 (Tribunal), a three-Member Bench considering Notification Nos. 242/76 and 112/87, followed the decision in Vaz Forwarding Pvt. Ltd. case, 1989 (43) E.L.T. 358 (Tribunal). Reference has been made to the decision in Alembic Glass Industries Ltd. v. Collector of Customs -1993 (67) E.L.T. 542 (Tribunal), but we notice that the decision did not consider the particular controversy raised before us. In Collector of Customs, Bombay v. Keshari Steels - 1994 (71) E.L.T. 768 (Tribunal), the decision in Hindustan Sanitaryware and Industries Ltd. -1993 (66) E.L.T. 683 (Tribunal) was followed by another two-Member Bench. The Bench also referred to certain other decisions which we find did not deal with the particular question. In Gujarat State Fertilisers Co. Ltd. v. Collector of Customs, Bombay - 1996 (88) E.L.T. 549 (Tribunal), considering a similar situation under Notification No. 23/77, another Bench followed the earlier decision in Vaz Forwarding Pvt. Ltd. -1989 (43) E.L.T. 358 (Tribunal) and Hindustan Sanitaryware Industries Ltd. -1993 (66) E.L.T. 683 (Tribunal). 8. In Ferro Alloys Corporation Ltd. v. Collector of Central Excise, Bhubanes-war -1997 (90) E.L.T. 405 (Tribunal), another Bench considered Notification No. 123/87 which granted exemption to "excisable capital goods, components and raw materials" when brought in connection with an undertaking approved by the Board of Approval for 100% export oriented undertaking. It was contended that the goods imported were used not in building the original plant but were used only in repairing the plant and were used as spare parts and not as components. The Bench referred to the dictionary meaning of "component" as "one of the parts or elements of which anything is made up, or into which it may be resolved" and indicated that if "component" means a "part", a part which is actually used as a spare part must be regarded as a component and observed that the expression "component" indicated the nature of the article and not the manner of user and expression "spare" indicated the manner of use and not the nature of the article. Keeping in view the broad objective of encouraging 100% export oriented units, it was held that there was no warrant for interpreting the expression "component" in any restricted manner and it must be understood in the manner in which it is ordinarily and generally understood, i.e. as a "part". Accordingly it was held parts used as "spares" are "components" within the meaning of the Notification and hence the benefit of the Notification was attracted. 9. Shri D.N. Mehta, appearing for appellant contended that, under the old tariff all parts, used as spares or otherwise were taken in by T.I. 72(3) and for years, Refractory Bricks were regarded as entitled to the benefit of lower duty, Notification 242/76 which was replaced by Notification No. 77/90 maintaining status quo, that there is no justification for understanding "component parts" in a narrow or restricted sense and "component" indicates the nature of the article and not the user thereof. According to him, the expression "component" must be understood in its functional sense and in a wide manner and if it was the intention to restrict the benefit of the Notification to parts to be used in the initial assembly or manufacture of furnace, it would have been so expressed and exemption Notification must be interpreted reasonably and not in a pedantic manner. Reference was invited to the report of Machinery Committee. Shri Sridharan contended that emphasis in the Notification is to the requirement of Refractory Bricks having "special shape or quality" and the requirement that the part must become a component part of a furnace. It must be intended for use as component part for which proposition he placed reliance on the decision in The State of Haryana v. Dalmia Dadri Cement Ltd. -1988 (14) ECR 292 (S.C.). It was pointed out that prior to 1976, the erstwhile T.I. 72(23) carried low rate of duty of 40% and since under the new tariff rate of duty was 60% under sub-heading 6901.02, it became necessary to maintain the old rate of duty and hence Notification 242/76 was issued and in due course it was replaced by Notification 77/90. Shri Ravinder Narain, Advocate supported the above arguments and contended that the judgments of the Tribunal holding against the assessee did not discuss the aspect of the words "for use" in the notification and the distinction drawn between the words "components" and "spares" in Ferro Alloys Corporation Ltd. -1997 (90) E.L.T. 405 (Tribunal). Shri D.S. Negi, SDR appearing for the department supported the earlier-decisions of the Tribunal [except Ferro Alloys Corporation Ltd. -1997 (90) E.L.T. 405 (Tribunal)]. According to him, "component part" is distinct from "spare part" and indicates only a part which is used in the initial manufacture or assembly and this is evident from the language used in certain Notifications; the word "component" necessarily indicates that it must be used in the first assembly or manufacture and since the Notification does not specifically refer to "spare" part imported for replacement is outside the provisions of the Notification. He contended that decisions under Sales Tax Law or Central Excise Law cannot be used in the interpretation of exemption Notification under Customs Law. According to him, the definitions in Import-Export Policies support the stand taken by the department. Since the Notification covers only Refractory Bricks used as component parts, it will not apply to Refractory Bricks used not in first assembly of Furnace but used as spare for replacement of damaged or worn out component parts. 10. Tariff Item 59 of the First Schedule to the erstwhile Indian Tariff Act, 1934 covered the following :- "Building and Engineering materials, all sorts, not of iron steel or wood, not otherwise specified including tiles other than glass, earthenware or porcelain tiles, and fire bricks not being component parts of any articles included in Item No. 72 or No. 74( 2)". Tariff Item 72(3) of the erstwhile tariff took in the following :- "Component parts of machinery as defined in Item Nos. 72, 72(1) and 72(2) and not otherwise specified, namely, such parts only as are essential for the working of the machine or apparatus and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose but excluding... Tariff rate of duty was 40% which could be considered as reasonably low rate of duty. 11. Customs Tariff Act, 1975 was brought into force with effect from 2-8-1976. At that time Government indicated that there was no intention to change the rate of duty on account of coming into force of the new Act. Accordingly several exemption notifications were promulgated, one of them being Notification No. 242/76 with the intention of retaining the 40% rate of duty for component parts. Section XIII of the new tariff deals with articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware. Chapter 68 covers "Articles of stone, plaster, cement, asbestos, mica or similar materials." Chapter 69 takes in "Ceramic products". Chapter Heading 69.02 took in the following: "Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths" Sub-heading 6902.10 read as follows : "Containing by weight, singly or together, more than 50% of the 85% elements Mg, Ca or Cr, expressed as MgO, CaO or Cr2O3". Sub-heading 6902.20 read as follows : "Containing by weight more than 50% of alumina (Al2O3), of Silica 85% (SiO2) or of a mixture or compound of these products". Chapter 84 of the new tariff deals with machinery and parts thereof. Chapter Note 1(a) of Chapter 84 excluded articles of Chapter 68 from the purview of Chapter 84. Chapter Note 1(b) of Chapter 84 excluded appliances and machinery or parts thereof of ceramic material (Chapter 69) from the purview of Chapter 84. under the new tariff refractory bricks would fall under Chapter 69 (tariff rate of duty was 85%). Thus it became necessary to issue Notification No. 242/76 to maintain the rate of duty at the old level. The notification exempted refractory bricks of special shape or quality for use as component parts of industrial furnaces falling under Heading 69.02 of the First Schedule to the Customs Tariff Act, 1975, from so much of that portion of the duty of customs leviable thereon which is specified in the First Schedule as is in excess of 40% ad valorem. Notification No. 77/90 was issued in the same terms. This notification also exempted another item 'soft ferrite' under Chapter Heading 69.09 from duty in excess of 55% ad valorem. The exemption in regard to auxiliary duty of customs was provided in Notification 112/87. Item 28 of the Table took in "Refractory Bricks of special shape or quality for use as component parts of industrial furnaces" of Chapter 69 of the Customs Tariff Act, 1975. 12. "Part" is defined in Black's Law Dictionary Sixth Edition at page 1117 as under :- "An integral portion, something essential belonging to a larger whole; that which together with another or others makes up a whole...a portion, share orpurpart". In Chambers 20th Century Dictionary the meaning given for "component" is as under :- "one of the parts or elements of which anything is made up, or into which it may be resolved". In Oxford Dictionary the meaning of "component" is :- "Contributing the composition of whole" In Webster's Dictionary the meaning given is "A part; a constituent, an ingredient." In our view, the common parlance meaning of the expression "component" is also the same, that is, one of the parts or elements of which anything is made up or into which it may be resolved or a constituent. The meaning in common parlance has to be looked into since the notification itself does not contain any definition of the expression. 13. Several decisions of High Courts containing reference to "part", "component" or spares have been placed before us in the course of submissions. In C.S.T. v. Amar Radio Cabinet Works -1968 (22) STC 63 (Bom. HC) entry No. 65 in the Bombay Sales Tax Act referring to wireless apparatus, radiographs, loudspeakers etc. and spare parts of wireless equipments and radiographs was considered. The question was whether radio cabinets sold by a dealer would attract entry 65 or the residuary entry 22. It was held .that while the word "part" has a general sense, "spare part" takes colour from the word "spare", that is a part which would require replacement in ordinary course on account of wear and tear and would not have the amplitude of the word "component". It was indicated that the owner of radio will not ordinarily keep an extra cabinet spare and, therefore, cabinet cannot be regarded as a spare part, though it is a component of radio and, therefore, entry No. 65 would not apply. In Commissioner of Sales Tax v. Pritam Singh -1968 (22) STC 414 (All. HC) the question arose in the context of manufacture of bodies of motor vehicles. Item 24 of the exemption notification referred to motor vehicles and component parts of motor vehicles. It was held that a component part of an article is an integral part necessary for the constitution of the whole article and without it the article will not be complete and body of a motor vehicle being an integral part of the motor vehicle has to be regarded as a component part. In Sujan Singh and Anr. v. A.A.C. Sales Tax - 1969 (24) STC 504 (Delhi HC) the question was whether the body of motor vehicle is a spare part within the meaning of the entry "motor vehicles including chassis of motor vehicles, motor tyres and tubes and spare parts of motor vehicles" under item 1 of first schedule to the Bengal Finance (Sales Tax) Act. It was held that spare part is an extra part kept for use in emergency for replacement, that every component will not be a spare part and no owner of vehicle would keep a body of motor vehicle as spare part and, therefore, it cannot be regarded as a spare part. In Bajoria Halwasiya Service Stn. v. The State of Uttar Pradesh - 1970 (26) STC 108 (All. HC) a similar question arose under the provisions of the U.P. Sales Tax Act and a notification issued thereunder. It was held that body of a motor vehicle is not a spare part, though it is a component since a spare part means a part kept in readiness for use in emergency and no owner of vehicle will keep body of a vehicle in readiness for use in emergency. It was held that every component part need not be a spare part while every spare part will necessarily be a component part. 14. In Paul Lazar v. State of Kerala -1977(40) STC 437 (Kerala HC) it was held that copper wire used in manufacture of transformers is not a component part thereof. It was indicated that component part has to be an identifiable object and copper wire used in the manufacture of transformer is not an identifiable object. 15. In Ghaziabad Engg. Co. (P) Ltd. v. Commr. of Sales Tax -1991 (80) STC 243 (Delhi HC) under the provisions of the Bengal Finance (Sales Tax) Act, the court considered entry 1 of first schedule of Bengal Finance (Sales Tax) Act, namely, motor vehicles, including motor vehicles tyres and tubes and spare parts of motor vehicles and held that fuel injection pump, which is a part of diesel engine is a component part of the diesel engine and not a component part of the motor vehicle and, therefore, the fuel injection pump sold as a spare part would not be a spare part of motor vehicle. In Khoday Distilleries (P) Ltd. v. Commr. of Commercial Taxes, Karnataka - 1991 (82) STC 251 (Karnataka HC) it was held that molasses used in the manufacture of Ethyl alcohol can be identified by chemical test and, therefore, is a component part of the end product. The Supreme Court in State of Madras v. R.M.K. Krishnaswami Naidu and Ors. -1970 (26) STC page 42 has taken a similar view. In State of Tamil Nadu v. Tube Investments of India Ltd. - 1992 (85) STC 245 (Madras HC) it was held that dynamo of a cycle is not a component part but an accessory of cycle. In Televista Electronics v. Commr. of Sales Tax -1992 (87) STC 410 (Delhi HC) in considering the entry relating to wireless receiving instruments and spare parts and accessories in the schedule to the Bengal Finance (Sales Tax) Act, it was held that a spare part is always a component part but the converse may not be invariably true. 15. In Star Paper Mills Ltd. v. Collector of Central Excise -1989 (43) E.L.T. 178 (S.C.), the Supreme Court held that paper core used for rewinding of paper in rolls is a component part within the meaning of Notification No. 201/79. The court relied on the dictionary meaning of the word "component" as "a constituent part". Since use of paper core is necessary for rewinding of paper if delivered to the customers in rolls, it should be a component part within the meaning of the Notification. 16. Notifications 246/76, 77/90 and 112/87 do not define the word "component part" with the result that one has to go by the meaning the word carries in common parlance. The dictionary meaning of "component" is "one of the parts or elements of which anything is made of or into which it may be resolved", or "a constituent part" and this meaning has been accepted by the Supreme Court in Star Paper Mills Ltd. -1989 (43) E.L.T. 178. Much is sought to be made out of the meaning stated as "constituent part". The suggestion is that it must be a part in the initial constitution of the manufactured product. This suggestion is merely based on a priori assumption. "Constituent", according to Chambers 20th Century Dictionary means :- "constituting or forming; essential; elemental; component; electing; constitution-making - n. an essential or elemental part; one of those who elect a representative, esp. in parliament; an inhabitant of one's constituency." Thus, "constituent" only means an essential part or component. Use of the words "component parts" or "constituent parts" is an example of tautology. "Constituent" and "component" essentially mean the same thing, that is, an essential part of which anything is made of or into which it may be resolved. When parts are put together to create an end product, they are regarded as component parts. When an assembled product is dismantled, it gives rise to component parts. Whatever be the stage, that is, before assembling, after assembling and after dismantling, such essential are [integral] part is a component, when a component part is damaged or is worn out and therefore requires replacement and is replaced, the replacing part does not cease to be a component part because it was not present in the initial assembly and had been put in the place of a damaged or worn out component part. The much wider meaning given to the expression "component" in Khodey Distilleries (P) Ltd. v. Commissioner of Commercial Taxes, Karnataka and Ors. -1991 (82) STC 251 (Kar. HC) and in State of Madras v. R.M.K. Krishnaswami Naidu and Ors. -1970 (26) STC 42 (SC) does not affect this position. A spare is a replacement part, to replace a damaged or worn out component; nevertheless it is a component part. 17. "Component" is the genus and "spare" is a species that is, component which is used for replacement. If all that is available is the use of the expression "component" or "component part", the usage must be understood in its normal connotation, in the absence of any specific qualification or restriction. There are several notifications where such qualifying or restrictive words have been used to suggest that the component part must have been used in the initial assembly or in the manufacture of the final product thereby excluding "spare" from the ambit of the expression "component part". There are no such qualifying or restrictive words used in the notifications under consideration. Hence, with respect, it is not possible to agree with the view taken in some of the decisions of the Tribunal that "component" implies parts used in the initial assembly or manufacture and excludes "spares". The amplitude and significance of the word "component" cannot be cut down in the absence of clear words indicative of any intention to restrict its meaning and operation. The view taken in Vaz Forwarding Pvt. Ltd. -1989 (43) E.L.T. 358 (Tribunal) was not followed in Metal Impacts Pvt. Ltd. - 1993 (64) E.L.T. 286 (Tribunal), but the distinction drawn based on the fact that the words "component parts" occur in isolation and not in conjunction with the final product is a distinction without difference. The amplitude of the words "component part" is not in any way restricted by using the words in conjunction with the article of which they are component parts. 18. We indicated that there are a large number of Notifications using appropriate language to bring out an intention to restrict the scope and amplitude of the word "component". The following table refers to the particulars:- ------------------------------------------------------------------------------- Notification No. Language used ------------------------------------------------------------------------------- 1. 82/60 Component parts of any machinery...required for the purpose of initial setting up of that machinery or for its assembly or manufacture 2. 80/70 Imported as replacement for defective component parts or peripherals 3. 117/70 Spare parts required for the purpose of manufacture 4. 74/85 Components are imported for the purpose of providing warranty coverage or after sales service by the manufacturer to his customers 5. 77/85 -Do- 6. 503/86 -Do- 7. 155/86 Parts required for the purpose of initial setting up or assembly or manufacture 8. 158/86 Components required for the manufacture of goods 9. 66/88 Component parts of goods covered by Notification No. 65/88 imported into India for the manufacture of the said goods 10. 269/88 Components required for the manufacture of forklift trucks 11. 97/89 Parts required for the manufacture of specified goods when imported into India by a manufacturer of such goods 12. 106/92 Components and parts when imported into India for repair of dredges. ------------------------------------------------------------------------------- In the above Notifications, wherever it was intended to restrict the amplitude and significance of the word "component", specific and appropriate language was used to bring out the intention. The Notifications contain illustration of intention to restrict the meaning of components as those to be used in assembly or manufacture or as spare. It is obvious that the word "component" includes "spare" and has very wide connotation and this position fully supports the view we have taken. Shri D.S. Negi, SDR in dealing with the above position, referred to following Notifications :- ------------------------------------------------------------------------------- Notification Language used ------------------------------------------------------------------------------- 1. 13/81-Cus. Capital goods, Raw materials components imported for the purpose of manufacture of articles for export out of India by 100% export oriented undertakings 2. 262/81-CUS Machinery, Raw materials, components, spare parts of machinery, consumables, packaging materials, office equipment, spares and consumables thereof, Tools, jigs, gauges, fixtures and accessaries proto types, technical and trade samples for development and diversification, Drawings, Blue prints and charts etc. ... imported for the production of goods for export or for being used in connection with the production or packaging of goods for export or for the promotion of such export by units... 3. 256/87-CUS Capital goods, raw materials, components, spares of production machinery, consumables etc. imported by or on behalf of the gem and jewellery units set up in ...Export processing zone ... for manufacture of jewellery for export by... 4. 260/87-CUS. -Ditto- 5. 3/88-CUS. -Ditto- 6. 277/90 -Ditto- ------------------------------------------------------------------------------- He points out that these notifications refer to components as well as spare parts and indicated that they refer to different articles, namely, parts used for first assembly or manufacture on the one hand and spares used for replacement. Notification No. 13/88 refers to raw materials, components and not spares, while the remaining notifications refer to both components and spare parts along with consumables, raw materials etc. These notifications indicate only an exercise to cover the main goods (capital goods or machinery) and all other articles connected thereto and necessary to set up and run export oriented production units. The fact that care has been taken to furnish an exhaustive list is not sufficient to give rise to an inference that word "component part" will necessarily exclude from its scope "spare parts" also. 19. It has been urged on behalf of the department that since the subject Notifications refer to "Refractory Bricks for use as component parts of...", that is an indication that the Bricks must be intended for use in the manufacture of furnace and not for use as spares. We have indicated that the word "component" cannot be understood in such a restricted manner. "Component" indicates that it must be an integral part. "Spare" is a component used for replacement. In other words, the word ^component" indicates the nature of the article and not the user of the article while the word "spare" indicates the use to which the article is put and not the nature of the article. The nature of the spare is that it is a component and its use is as replacement. "Component" means an essential or integral part of the whole. Its user is in different contexts, in the initial manufacture or as spare. As already indicated, "component" is the genus and spare is a species. The word "component" without any qualifying or restrictive words must be allowed free play and must comprehend components used for initial manufacture or for replacement. 20. Reference is made to the treatment given to these words in Import-Export Policies of different years. The following definitions occur in 1992-97 Policy :- "Component means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved. A component includes an accessory or attachment." "Spares means a part or a sub-assembly or assembly for substitution, that is ready to replace an identical or similar part or sub-assembly or assembly. Spares include a component or an accessory." Care has been taken to bring out that "spare" comprehends "component". The definitions in 1985-88 Policy are as follows :- "Component means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved and includes an accessory or attachment." "Spare means a part or sub-assembly or assembly for substitution i.e. ready to replace an identical similar part or sub-assembly or assembly, if it becomes faulty or worn out, and includes an accessory (attachment) in the same regard." The two sets of definitions are almost identical except that according to 1992-97 Policy, spare includes component. This, in our opinion is clarificatory of the correct position, namely, that while every spare is a component, every component may not be a spare as illustrated by the decisions in Commissioner of Sales Tax v. Amar Radio Cabinet Works -1968 (22) STC 63 (Bom. HC), Sujan Singh and Anr. v. Appellate Asstt. Commissioner of Sales Tax - 1969 (24) STC 504 (Delhi HC), Bajoria Halwasiya Service Station v. The State of Uttar Pradesh and Anr. - 1970 (26) STC 108 (All. HC) and Televista Electronics (P) Ltd. v. Commissioner of Sales Tax -1992 (87) STC 410 (Delhi HC). The broad definitions of component and spare given in the Policies are only a reflection of the dictionary-meaning which we have already considered as supporting the stand taken by the assessee. The inclusive definition of spare in 1992-97 Policy does not go against it. 21. In The Tata Oil Mills Co. Ltd. v. Collector of Central Excise -1989 (43) E.L.T. 183 (SC) the provisions of Notifications 46/72 and 25/75 came up for consideration. The Notifications allowed rebate or exemption in case rice bran oil is used in the manufacture of soap. The oil has to be purified before use in the soap manufacturing process. Purification and manufacture were attended to by the assessee in two different factories. The court rejected the contention of the department that the Notifications were not attracted since the oil was not directly used in the manufacture of soap. Hydrogenated Rice bran oil did not cease to be rice bran oil. The court observed as follows :- "...an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted ... so far as (a) is concerned, the object of the notification - even as the Tribunal finds - is to grant a concession to a manufacturer of soap who manufactures soap from rice bran oil to a substantial extent and thus discourage the use of edible oils in the manufacture. If these two aspects are considered together, it is clear that the emphasis in the notification is not that rice bran oil should be used as raw material in the very factory which produced the soap. The requirement is that the soap manufacture should, to a prescribed extent, be from rice bran oil as contrasted with other types of oil. The contrast is not between the use of rice bran oil as opposed to rice bran fatty acid or hydrogenated rice bran oil, the contrast is between the use of rice bran oil as opposed to other oils. That is the ordinary meaning of the words used. These words may be construed literally but should be given their fullest amplitude and interpreted in the context of the process of soap manufacture. There are no words in the notification to restrict it to only cases where rice bran oil is directly used in the fatty acid derived from rice bran oil. The whole purpose and object of the notification is to encourage the utilisation of rice bran oil in the process of manufacture of soap in preference to various kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification even when it is clear that rice bran oil can be used for manufacture of soap of the only after its conversion into fatty acid or hydrogenated oil." (Emphasis supplied) 22. We have considered the matter in the light of the guidelines formulated by the Supreme Court. The furnace, the final product is made of layers of sheets put together and inner sides are lined with Refractory Bricks of special shape or quality which could withstand high temperatures. After some time, the Refractory Bricks get damaged or suffer wear and tear and are no longer fit for the purpose for which they are used in the lifting and require to be replaced. For a long period prior to the coming into force of Central Excise Tariff, under erstwhile T.I. 72(3), tariff rate of duty of all component parts of machinery, namely, such parts as are essential for the working of the machine and have been given for that purpose some special shape or quality was 40%. There is no dispute that erstwhile T.I. 72(3) covered spares also. With the coming into force of Central Excise Tariff Act, 1975, under sub-heading 6902.01, the prescribed rate of duty was 85%. The statement of objects and reasons of the new Act indicated intention to maintain old level of effective duty by issuing appropriate exemption notifications. It was with this object that Notification No. 242/76 was issued exempting Refractory Bricks of special shape or quality for use as component part of Industrial Furnaces falling under Heading 69.02 from so much of the portion of the duty as is in excess of 40% ad valorem. Notification No. 77/90 continued this state of affairs. There is nothing in this background or the terms of the Notifications to indicate any intention to maintain the level of duty only in regard to Refractory Bricks used in initial assembly or manufacture of Furnaces and not to maintain the level of effective rate of duty in respect of Refractory Bricks used as spares. The language used in the Notification is clear, unambiguous and of wide import. Considering the process involved and the broad object, import and language of the Notifications, the absence of any words of restriction or qualification, any restrictive interpretation will lead to frustration of the underlying object and cannot be adopted. On a reasonable interpretation, it is clear that application of the Notification is not restricted to cases of intended use in initial assembly or manufacture of Furnace and covers cases of intended use as spares also. 23. It is contended on behalf of the department that meaning of words used in one statute cannot be used in interpreting the words used in another statute, without reference to the subject matter or the context or the language used in the two statutes. The proposition canvassed is unexceptionable. This proposition is projected to contend that the various decisions of the Supreme Court and the High Courts which arose under Central Excise Law or Sales Tax Law cannot be adopted in this case. The decision of Supreme Court in Star Paper Mills Ltd. -1989 (43) E.L.T. 178 (SC) dealing with an exemption Notification in relation to Central Excise duty applied only dictionary meaning of "component part" which had not been defined in the Notification. The various decisions of High Courts referred to earlier under relevant Sales Tax statutes also deal with the expression "component parts" also not defined in those statutes and the High Courts resorted to dictionary meaning or popular meaning. In the Notification under our consideration also, "component part" has not been defined and we have gone by the dictionary meaning which is also the popular or common parlance meaning and to that extent the decisions have relevance. 24. Appellant has placed reliance [on] Circular No. 8/88 dated 12-4-1988 of the Central Board of Excise and Customs issued on a representation claiming that Refractory Bricks use in Electric Arc Furnace for the manufacture of steel must be treated as input for the purpose of availing Modvat credit under Rule 57A of the Central Excise Rules, 1944. The Board indicated that Refractory Bricks "are used in Electric Arc Furnace for giving inner lining which become an integral part of Electric Arc Furnace (Machinery). Therefore the same would not be eligible for Modvat credit." A Larger Bench of the Tribunal has held that parts of machinery are not excluded from the purview of Modvat scheme. However, the view of the Board that Refractory Bricks became an integral part of Furnace supports the view taken by us which is that an integral part of Furnace must certainly be regarded as "component part" of Furnace. 25. For the reasons indicated above, we hold that "component parts" referred to in the Notification under consideration would cover "spare parts" and benefit of the Notification would be available also in respect of import of Refractory Bricks intended for use as spare parts. Appellant is, therefore, entitled to the concessional rate of duty under the Notification in respect of the subject import. With respect, we hold that the earlier decisions taking a contrary view did not lay down the law correctly. 26. The impugned order is set aside and the appeal allowed. Shiben K. Dhar, Member (T)
27. With respect, I have arrived at a different conclusion through my separate order as under:
1. The short question that calls for answer is whether refractory bricks imported as spare parts can be considered as imported "for use as component parts of industrial furnace".
2. The Shorter Oxford Dictionary gives the meaning of word component' as:
"Composing : making up; constituent. A constituent part or element". "Part" is defined as "that which with another or others makes up a whole, a portion, section, element, constituent,"
In Funk and Wagnalls' New Standard Dictionary of the English Language (1953 Edn.) 'component' is explained as "forming part of ingredient, constituent, a constituent element or part."
"Part" means that which goes with other to constitute the whole. The meaning given in Webster's International English Dictionary (Vol. I, 9th Edn.) is : "Serving or helping to form, comprising - constituting, constituent the component parts of natural bodies."
2.2 The emphasis is on the word composition. Composition is referred to in Shorter Oxford Dictionary as : the action of combining; the fact of having combination; combination (of parts or elements of a whole); formation, construction.
The concept of component part entering into manufacture of a product was explained by the Hon'ble Apex Court in case of Star Paper Mills Ltd. v. C.C.E. - 1990 (76) STC Page 312. The Apex Court referred to the meaning given to word "Component" in Webster Comprehensive Dictionary where the word "component" inter alia means a constituent part. Dealing with the definition of "manufacture" thereafter, the Supreme Court observed that what has to be considered is whether in the manufacture of paper, paper core is used as a constituent part and is necessary to be used in "any process incidental or ancillary to the completion of a manufactured product", namely, paper in that case. Supreme Court held that paper core would come within the expression any process incidental or ancillary to the completion of manufactured product and would fall within the term component parts used in the Notification so far as manufacture of paper is concerned. The emphasis therefore was on use of component parts in manufacture.
2.3. Spare part on the other hand connotes a part which requires replacement in the ordinary course on account of wear and tear and is an extra item for use in emergency. The emphasis in regard to component parts is on the fact of composing or constituting. It must serve or help to form, comprise, constitute; a component part goes into composition of another article. If an article is an element under the composition of another article made out of it such an article may be described as a component part of the other article. Component parts, therefore/denote parts which go into forming of another article and are constituent parts of that article. Spare part on the other hand is a mere replacement of a part which went into forming a whole initially as a constituent of that whole.
3. The difference between component part and spare parts was explained by Bombay High Court in the case of Commissioner of Sales Tax v. ACME Mfg. Co. Ltd. -1990 Vol. 78 STC Page 79:
"4. As regards the first question, there cannot possibly be any serious dispute that in common parlance components are items or parts which are used in the manufacture of the final product and without which final product cannot be conceived of. Spare parts are those component parts which, in the course of use, wear and tear out frequently and are, therefore, required to be kept in readiness for use as and when necessary. Reference may usefully be made in this context to the plain dictionary meaning of these expressions as per the Shorter Oxford English Dictionary:
"Component": "Composing, making up, constituent, a constituent part or element.
'Spare': Not in actual or regular use at the time spoken of, but carried, held or kept in reserve for future use or to supply on emergency; additional, extra, that can be spared, dispensed with or given away, as being in excess of actual requirements, superfluous"
(emphasis added).
4. Notification exempts refractory bricks of special shape and quality when imported into India for use as component part of industrial furnace. Now Notification uses the expression "for use as component parts". The lining of the furnace is made up of the refractory bricks joined together which acts as a component part of the furnace being, an integral part. Different qualities of refractory bricks may be used as linings on sides, on bottom and top. The purpose of the refractory lining is to protect furnace from the damage from intense heat generated in the furnace. Refractory bricks are, therefore, put to use as lining of the industrial furnace.
5. Assuming an industrial furnace needs 1000 bricks to constitute the lining. These 1000 bricks constituting the lining are component parts of industrial furnace. An importer imports 1500 refractory bricks and describes these in the invoice as (a) 1000 bricks component parts and (b) 500 bricks as spare parts. So far as requirement of refractory bricks for use in industrial furnace goes, the requirement is satisfied through import of 1000 bricks on which concessional rate of duty can be legitimately claimed. Can 500, remaining bricks, in this context, be described as refractory bricks for use as Component Parts of industrial furnace? At that stage, they certainly are not the component parts for use of industrial furnace for the use is already met through the import of 1000 refractory bricks. These 500 spare bricks, therefore, cannot be considered for use as component parts of industrial furnace at that stage. Parts which are in excess of the requirement to make up an article are even for classification purpose assessed separately.
6. To the question whether these spare parts could be diverted for use otherwise other than as component parts of industrial furnace, ld. Counsel, Shri Sridharan, forcefully submitted that refractory bricks being of special shape and size cannot be used anywhere else except in industrial furnace.
6.2 Perusal of Tribunal's orders in case of Steel Authority of India Ltd. v. Collector of Customs -1989 (42) E.L.T. 89 (Tribunal) would, however, reveal that this may not always be so. In that case, a refund claim was filed contending that refractory bricks were eligible to exemption under Notification 242/76, dated 2-8-1976 on the ground that refractory bricks of special shape and quality are for use as component parts of industrial furnace. It was, however, held by Tribunal that the refractory bricks in question were meant for use in the steel teeming ladle and not for industrial furnace and as such were not eligible for the benefit of the notification. Tribunal held that teeming ladles are not incorporated into nor are these the integral part of furnace. Tribunal, therefore, held that refractory bricks as imported even of special shape and quality cannbt be considered as component parts of industrial furnace.
7. Ld. Advocate, Shri Ravinder Narain argued that even when these spare parts are used as spare parts they are used only as component parts of the furnace.
That two terms would appear even conceptually not interchangeable should be clear from the preceding paras. The language of the Notification however makes it clearer.
7.2 The Notification uses the expression "when imported into India". One of the meanings given to the word "when" in Shorter Oxford Dictionary is "at what time or on what occasion". In Black's Law Dictionary it is defined as "in the event that; on condition that". The world is generally implied as an equivalent to word "if" in legislative enactments and in common speech. Considering these definitions, there is no doubt therefore that the entire clause read as a whole in the exemption Notification uses the word "when" to indicate the purpose of the Notification for import. So read, it means Refractory Bricks are exempted from duty if imported into India for use as Component Part of Industrial furnace.
7.3 The emphasis therefore is on the use of the material. For what purpose, therefore, were these spare parts imported. To revert to the example already furnished, whereas 1000 bricks satisfied the requirement of use as component parts of industrial furnace the 500 refractory bricks imported as spares were only replacement parts and not component parts at that point of time. If "when" has to be read as "if" it will be very clear that these 500 bricks were imported not as component parts of industrial furnace but only as spare parts. These spare parts when used would be so used only as replacement parts of components that had gone into composition of whole for these do not by themselves go into composition which is already there.
7.4 It is in this context that Tribunal in case of Vaz Forwarding Pvt. Ltd. v. C.C. -1989 (43) E.L.T. 358, in my view correctly summarized the position as under:
"The word "Component Part" used in the notification cannot be ignored. If it was the intention of the notification to exempt parts used for initial assembly as well as parts imported later for replacement, the notification should not have used the word "component" and should have really mentioned "parts". We are inclined to agree with the submissions of Sh. Shah, JDR, that the same parts when initially used in the assembly or manufacture of the machine would be called "component parts" whereas the same parts imported for subsequent replacement of its part of initial assembly has to be considered as "spare parts".
7.5 It will be clear as indicated by Bombay High Court in case of ACME Mfg. Co. Ltd. (supra) that components are items or parts which are used in the manufacture of final product and without which the final product cannot be conceived of. Spare on the other hand are not in regular or actual use at the time spoken of. These are extra, additional, that can be spared, dispensed with or given away (emphasis added) as being in excess of actual requirement, superfluous.
8. In case of Commissioner of Sales Tax v. Amur Radio Cabinet Works -1968 STC Vol. XXII Page 63 - Bombay High Court made a distinction even between parts and spare parts. The Court observed "as a matter of plain language, the expression "spare parts" connotes a part which requires replacement in the ordinary course on account of wear and tear, and as an extra item for use in emergency. Mr. Banaji's argument seeks to equate the expression "spare parts" with the term "parts", and does not give to the expression "spare parts" the colour that is [lent] by the word "spare" with which it is associated in the entry. Again in the case of Sujan Singh and Anr. v. Appellate Commissioner of Sales Tax -1969 STC Vol. XXIV Page 504 - it was held by High Court of Delhi that "spare part" means "an extra part of a vehicle or machine kept for use in emergency or replacement."
The expression "spare part" cannot be equated with "parts" without regard to the colour that is lent by the word "spare". The Court observed that the expression "component" is different from the expression "spare parts" with which we are alone now concerned. In case of Televista Electronics (P) Ltd. v. Commissioner of Sales Tax - 1992 STC Vol. 87 Page 410 - the Delhi High Court observed, "the fact that at different points of time the relevant entries, some time contained the expression "component parts" and some time "spare parts", and in the 1975 Act Entry No. 1 contains both, namely, "spare parts" as also "component parts" leads to the inevitable inference that these terms are not treated as interchangeable.
9. Ld. Counsel, Shri D.N. Mehta, referring to the Doctrine of Contemporanea Expositio, in support of his case pressed into service a report of a Committee headed by an ICS Officer.
It is now well settled position of law that the Doctrine of Contemporanea expositio is not applicable to modern statutes.
9.2 In case of Senior Electrical Inspector and Anr. v. Laxmi Narain Chopra and Anr. - AIR 1962 (SC ) 159, the Hon'ble Apex Court held :-
"The legal position may be summarised thus :
The maxim Contemporanea expositio as laid down by Coke was applied to construing ancient statute, but not to interpreting Acts which are comparatively modern .... But in a modern progressive society it would be unreasonable to confine the intention of a legislature to the meaning attributable to a word used at the time the law was made, for a modern legislature making laws to govern a society which is fast moving must be presumed to be aware of an enlarged meaning the same concept might attract with the march of time and with the revolutionary changes brought about in social, economic, political and scientific and other fields of human activity."
9.3 Apex Court in case of J.K. Cotton Spinning & Weaving Mills v. UOI -AIR 1988 SC 191 - relied upon the case of Senior Electrical Inspector (supra) in holding that maxim Contemporanea expositio is applicable to ancient statutes and not the modern statutes. In case of Doypack Systems Pvt. Ltd. v. UOI-AIR 1988SC 782-Hon'ble Apex Court held that Contemporanea expositio only relates to ambiguous language in old state. Hon'ble Court held:
"It is, therefore, well to remember what Lord Watson said in Clyde Navigation Trustees v. Lord -1883 (8) AC 658 that Contemporanea expositio could have no application to a modern Act but applies only to construction of ambiguous language in very old states. We, therefore, reject the attempt on the part of the petitioners to lead us to this forbidden track by referring to various extraneous matters which we have indicated before."
9.4 In case of Punjab Traders and Ors. v. State of Punjab - AIR 1990 (SC) 2300 [Para 16] - the Hon'ble Apex Court refused even to adopt the understanding of the persons who dealt with the statute at the material time by holding:
"Even if it is true that persons who dealt with the statute understood its provisions in a restricted sense, such mistaken construction of the statute did not bind the Court as to prevent it from giving it its true construction."
9.5 I am of the view, therefore, that Doctrine of Contemporanea Expositio cannot be pressed into service in this case.
10. In case of Attri Electronics v. C.C. - 1991 (52) E.L.T. 73 (Tribunal) held that spare is a part or a sub-assembly or an assembly which is ready to replace an identical part or sub-assembly or assembly, when the same becomes faulty or worn-out. Colour picture tubes as were imported were used as part or assembly of such a manufactured product like the Coloured T.V. is made-up and into which the same is resolved. Tribunal, therefore, held that these cannot be considered as spares but are components The Import-Export Policy 1983-84, as set out at Page-74 of that Order under Point No. (i) is extracted below :
"Point No. (i) The term 'spares' mentioned in the 1983-84 Import and Export Policy as per Para 5(11) which reads as follows :
"Spare" means a part of sub-assembly or assembly for substitution, i.e., ready to replace an identical similar part or sub-assembly or assembly, it becomes faulty or worn out, and includes an accessory (or attachment) in the same regard".
The term 'Part' is defined in Para 5(15) as follows :
"Part" means an element of a sub-assembly or assembly, not normally useful by and not amenable to further itself disassembly for maintenance purposes. (It could be a component, spare - depending upon the nature of its use/requirement)."
The term 'accessory' is defined under 5(14) as follows :
"Accessory" (or attachment) means a part, sub-assembly or assembly that contributes to the effectiveness of a piece of equipment without changing its basic functions"
The term 'component' is defined under Para 5(10) as follows:
"Component" means one of the parts or sub-assemblies or assemblies, of which a manufactured product is made up and into which it may be resolved and includes an accessory (or attachment)"."
10.2 Subsequently, however, during 1992-97 Policy was amended to give an artificial definition to the term spares by mentioning that Spares include-a component. This, however, was done only by an inclusive definition. Hon'ble Apex Court in case of CIT, A.P. v. Taj Mahal Hotel - AIR 1972 SC 168 held:
"The word "includes" is often used in interpretation clause in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include."
It is, therefore, clear that the inclusive definition given to the spares is of no assistance to the appellants in equating Components with Spare Parts.
10.3 During the period when Spares did not include Components, the Tribunal in case of Attri Electronics (supra) held that Picture Tubes used as Components would not be covered under the term of Spares. Now, during subsequent period however because of inclusive definition, such Components would be covered by the term "Spares".
11. Etymologically, the terms "Component Parts" and "Spare Parts" are different and these cannot, therefore, conceptually be looked upon as the same : the mental image evoked by one is distinct from the image evoked by the other: the two terms are not interchangeable, therefore.
12. In the result, for the reasons mentioned hereinbefore, with respect, I am of the view that earlier orders are correct and appellants are not entitled to concessional rate of duty under Notification in respect of the subject import. I therefore uphold the impugned order and reject the appeal.
The impugned order is set aside and the appeal is allowed in accordance with the majority view.