Customs, Excise and Gold Tribunal - Delhi
Sujatha International vs Collector Of Customs on 23 March, 1987
Equivalent citations: 1989(42)ELT413(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. These two appeals were originally filed as Revision Applications before the Govt. of India and were statutorily transferred to this Tribunal for disposal as appeals. Both these appeals involve common questions of law and facts; both were represented by the same Consultant. We, therefore, heard them together and proceed to dispose of them together.
2. The question before us is whether the appellants are entitled to the benefit of project importation in respect of the goods imported by them. The appellants imported Dubbing and Recording equipments stated to be for the substantial expansion of an existing unit. They sought registration of contract in respect of the same so as to become eligible for concessional assessment under the Heading 84.66-CTA. The Assistant Collector rejected the claim for registration after noting that in spite of a request and a reminder, the appellants did not produce the contract. He rejected the claim made by the appellants in the following words:
"The facility of project contract registration and classification of the imported items under Heading No. 84.66 CTA is not open to all classes of goods and all classes of importers. The facility is restricted to importations made for the initial setting up or substantial expansion of a specified industrial plant which is installed at a particular place, engaged in the manufacture or production of an article and which is also having a designed or installed capacity. It is also stipulated that the importations should take place against a specific contract or contracts. The equipments being imported are used in the production of motion pictures and not in the production of any articles and the unit is not an Industrial Plant. The applicants and the unit for which registration of project contract is sought fail to satisfy the conditions and stipulations laid down in the provisions of Heading No. 84.66 (i) CTA and the Project Imports (Registration of Contracts) Regulations, 1963. The fact that the import licence bears "Project Import" endorsement does not affect the merits of the case, because project contract benefit can be extended only if all the conditions laid down in the Tariff Heading and the Regulations are satisfied.
The request for registration of project contract made by M/s. Sujatha Cine Arts is inadmissible for the reasons mentioned above and is accordingly rejected."
3. The appellants then filed an appeal before the Appellate Collector. The Appellate Collector rejected the appeals holding that the activity of dubbing films by itself and in combination with other activities would not merit being called an activity comparable to complex activities in an Industrial Plant as specified under the entry 84.66. He further recorded that the benefit under this entry is only to cater to substantial industrial activity to earn the name "Project" and not just a more "Industrial" or "Commercial" activity without substantial turnover. In sum, the Appellate Collector held that the matter would fall outside the scope of the word "Industry" viewed in the manner stated above. He, therefore, upheld the orders of the Assistant Collector.
4. Aggrieved by this order, the appellants filed a revision application.
5. We heard Shri S. Rajaraman, Consultant for the appellants and Shri J. Gopinath, Ld. SDR for the department. Shri Rajaraman argued that according to the Assistant Collector there was no contract and dubbing was not a manufacturing activity. He submitted that according to the Appellate Collector's order dubbing has been accepted to be a manufacturing activity but the Appellate Collector held that dubbing was not a complete activity and was, therefore, not a project. The Ld. Consultant submitted that the Appellate Collector was wrong in giving this finding. He argued that there was indeed a contract inasmuch as the order placed by the appellants, letter of acceptance, proforma invoice sent by the importers and Letter of Credit opened by the appellants, all taken together would constitute a contract. He submitted that the contract need not be a single document and these documents taken together should form a contract. He further submitted that the import licence was issued to the appellants and in that licence the appellant's unit was mentioned as a "large scale industry". He also referred to the certificate given by National Films Development Corporation (NFDC) (dated 29.4.80) wherein it was stated that the appellants were considered as manufacturers/exporters. Shri Rajaraman submitted that the impugned order of the Appellate Collector was arbitrary and that it referred to conditions not mentioned under Heading 84.66-CTA. He further clarified that imported equipment was not mobile as assumed by the authorities below and submitted that the equipment had to be used in acoustic surroundings involving high skill and sound proofing. Shri Rajaraman also referred to a letter dated 24,9.81 from National Films Development Corporation Ltd. wherein it was "confirmed" that film production activity comes under what is generally recognised as the film industry. He further referred to Public Notice No. 196/83 issued by the Collector of Customs, Madras wherein film processing laboratory was notified to be eligible for assessment under the Heading 84.66.
6. Shri J. Gopinath, Ld. SDR opposing the arguments stated that in commercial practice, there is always a contract when a firm order is placed and is accepted by the importers and exporters, respectively. He submitted that it cannot be considered that there is a contract merely because the appellants have a proforma invoice and Letter of Acceptance and Letter of Credit. Shri Gopinath further submitted that the Heading 84.66 itself prescribes such a contract and this provision cannot be sought to be circumvented by the arguments of the Ld. Consultant for the appellants. He also pointed out that in the application for registration of contract (in column 9) it was mentioned that "Orders booked over phone through an agent in Madras", and submitted that this would show that there was no contract as contemplated by the Heading 84.66. He further submitted that in column 6 of the same application for registration the appellants mentioned that Dubbing Theatre was being put up for "own and hiring purposes". Therefore, the Ld. SDR submitted that the appellants were not manufacturing but were in fact hiring out the equipment.
7. Shri J. Gopinath, Ld. SDR further pointed 'out that the Public Notice issued by the Collector of Customs, Madras was based on an instruction of the Govt. of India prescribed two conditions for eligibility of Photo Colour Lab. and Printing Machines to project importation and consequent benefit of concessional assessment. These conditions were that the unit should be recognised as 'industry' by the DGTD or Director .of Industry of the State Govt. and that the unit should be registered as a factory under the Factories Act. Shri Gopinath in support of his arguments quoted a Judgment of Madras High Court in WP. No. 8398 of 1984 (Dass Colour Lab. v. Assistant Collector of Customs, Madras and two others). He further submitted that the certificate given by N.F.D.C. was intended purely for I.T.C. purpose and this certificate does not amount to the registration of appellant's unit as an industry. He also referred to a letter from the Director of Industries and Commerce, Madras (dated 3.6.80) and argued that this letter did not amount to the recognition of the appellant's unit as Industry but merely recommended to the Joint Chief Controller of Imports & Exports that he should make an endorsement as "Project Import" for the purpose of customs duty. Shri J. Gopinath further referred to the Project Report of the appellants dated 5.8.80 (which was also submitted alongwith the application for contract registration) and pointed out that in the last para of the same, the appellants themselves mentioned that after the erection of the machinery the appellants would register the firm under the Factories Act "because of expansion".
8. We have considered the arguments of both sides. We have perused the Heading 84.66 of CTA and also the documents placed before us. The questions that arise for decision are whether there was a contract and the same was registered before the Customs as required by the Heading 84.66 and whether the appellants are entitled to registration of such a contract if it existed.
9. The arguments of the appellants that the order placed by them, acceptance, Letter of Credit etc. should be taken as a contract, does not appear to be tenable. As submitted by the Ld. SDR in commercial practice when valuable goods are bought and sold, there should be some sort of a formal contract. This is what is contemplated by the Heading 84.66 wherein a contract is specifically mentioned.
10. Apart from this, we note that the Govt. of India issued certain instructions laying down the conditions in respect of eligibility of Photo Colour Laboratories and Printing Machines, to project importation. These instructions lay down two conditions, namely; that the unit concerned should be recognised as an Industry and should be registered as a Factory under the Factories Act. The High Court of Madras in their Order passed in WP. 8398 of 1984 examined the question of eligibility of such laboratories to the benefit of project import. The High Court took note of the policy decision of the Govt. of India to extend the project import facility to Automatic Colour Film Processing and Printing Machine subject to the fulfilment of two conditions. The High Court recorded that the first condition relates to the importers being a unit registered with DGTD or with State Director of Industry. The 2nd condition as noted by the High Court relates to the unit qualifying itself to be calling a factory within the meaning of the Factories Act.
11. We have examined the present matter in the light of this Judgment of the High Court of Madras. The appellant's plea is that the letter of the NFDC shows that they are an Industry. But as pertinently pointed out by the Ld. SDR, the NFDC certificate is intended only for the purpose of recommending the import licence. The NFDC cannot exercise the powers which are vested in DGTD or with State Director of Industry. The appellants have not shown that either of these authorities have registered their unit. Therefore, it must be held that first condition prescribed has not been satisfied.
12. There is not even a claim that the appellants' unit qualified itself to be called as a factory within the meanings of the Factories Act. We note that as per the project report filed with customs, the appellants under took to register the firm under Factories Act after the erection of the machinery which was to be imported. It is, therefore, an admitted fact that till the time of importation of goods, the appellants' unit was not registered as a factory.
13. This would show that neither of the conditions laid down in the Judgment of Madras High Court, cited by the Ld. SDR, have been fulfilled by the appellants. Therefore, it is not necessary to examine any other aspect inasmuch as if these conditions are not satisfied the benefit of project importation cannot be extended to the imports made by the appellants. The authorities below rejected the claims of the appellants for other reasons. Though we do not agree with the reasons, we cannot overlook the legal position as laid down by the High Court in their Judgment.
14. In the light of the discussions, we hold that the appellants are not entitled to the benefit of project importation. We, therefore, uphold the impugned orders though not for the reasons recorded therein. The appeals arc dismissed.