Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Customs vs Gammon India Ltd. on 4 April, 2003
Equivalent citations: 2003(156)ELT883(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. Gammon India Ltd., Mumbai, the respondent to this appeal, and Atlanta Infrastructure Ltd., Mumbai, entered into a joint venture agreement on 18th September, 2000. The agreement was entered into for the purpose of tendering a bid to the National Highway Authority of India in order to secure the contract for construction of the stretch from 31.40 kilometres on National Highway 5. The venture provided for financial responsibilities of each party in the form of guarantees, securities etc., to the extent of 50% of project value, for setting up a management board to manage the venture, composed of a Chairman and Director to be appointed by Gammon India Ltd. and a Joint Chairman and another Director to be appointed by Atlanta Infrastructure Ltd. It provided that the parties shall be jointly and severally liable to the National Highway Authority of India for execution of contract. It designated Gammon India Ltd. to be the lead partner to the venture.
2. The bid tendered by the joint venture was accepted by the National Highway Authority of India. Gammon India Ltd. subsequently imported a mobile batching plant which, we are told, is an equipment required in road concrete mixing plant. In the bill of entry that it filed in the Bombay Custom House in July, 2001 for clearance of this plant, it claimed exemption from duty in terms of Entry 217 of the table to Notification 17/2001. This entry exempts from duty goods specified in the notification required for construction of roads subject inter alia to the condition that the goods are imported by the Ministry of Surface Transport or a person who has been awarded a contract for construction of roads in India by or on behalf of the Ministry of Transport or other authorities designated in the notification of the Central or State Government or by a person as sub-contractor to a contract that has been awarded by any of these authorities. With regard to two of the machinery qualifying for exemption, stone crushing (cone type) plants and concrete batching plants 50 cum/hr., the exemption is also subject to the further condition and that the importer produces a certificate from not below the rank of Deputy Secretary in the Ministry of Surface Transport (Roads Wing) of the Government of India to the effect that the imported goods are required for construction of roads in India. The Custom House proposed to deny the exemption on the ground that the contract for construction of the stretch on highway in question had been awarded not to Gammon India Ltd., the importer of the goods, but to Gammon-Atlanta (JV) and that the certificate issued by the Deputy Secretary to the Government of India in terms of the exemption, in regard to batching plant is indicated that the contract had been awarded to the Gammon-Atlanta (JV) and not to Gammon India Ltd. The importer waived issue of notice at the hearing and requested a decision. The Deputy Commissioner of Customs, basing his reasoning on the grounds above, and holding that an exemption notification is strictly interpreted, concluded that since the importer did not satisfy the conditions contained in the exemption notification, it was not entitled to the exemption and denied it.
3. The importer appealed from this order to the Commissioner (Appeals). The Commissioner (Appeals) took the view that the benefit of the exemption was available for the following reasons. The joint venture agreement provided that each of the parties shall be jointly and severally liable to the National Highway Authority of India. It further provided Gammon India Ltd. to be the lead partner, who was authorised to receive instructions for and on behalf of the partners of the joint venture. The goods were required for the purpose of the project and "the statutory authority has also issued the necessary certificate for duty free import.... May be due to some technical reasons the goods have been imported in the name of Gammon India Ltd. still out right denial of the exemption notification was not warranted....... I am of the view that once goods are exempted by way of a notification we have to go for the purpose and spirit of notification. In the present case at the most an undertaking/declaration might have been taken to the effect that the impugned goods are being imported on behalf of the Joint Venture. Another course of action was also available to the appellants that they could have filed a warehousing bill of entry in their name and then transferred the goods to the Joint Venture by way of ex-bond bill of entry thereby availing the benefit of the impugned notification." He therefore held that the benefit of the exemption was available to the goods. This appeal by the Commissioner is against that order.
4. The departmental representative emphasises that Gammon India Ltd. is neither a contractor who has been awarded a contract for road building by any of the authorities specified in the notification, nor a sub-contractor of such contractor. The goods are imported not by the joint venture but by an individual partner constituted by a joint venture. No intention is manifest in the notification to allow the exemption to imports made by individual partners of the joint venture. The Commissioner (Appeals) has erred in taking the view that the notification is clearly interpreted. He should have gone by the plain words of the notification.
5. Counsel for the respondent contends as follows. The status of the joint venture in question is to be determined keeping in view the terms and conditions of the joint venture agreement. It operates from the office of Gammon India Ltd., who is the lead partner and partner in charge. It is also the authorised signatory and power of attorney holder of Atlanta Infrastructure Ltd. Therefore, for all practical purposes, Gammon India Ltd., in its individual capacity, is responsible for each and every act done by the joint venture. The joint venture in question is not a legal entity. It is not registered under any of the provisions of the Companies Act, 1956 or of the Partnership Act, 1932. The contract to the National Highway Authority of India has not been signed by a joint venture as such but by Gammon India Ltd. and Atlanta Infrastructure Ltd. The letter dated 3-8-2001 of the National Highway Authority of India makes it clear that the permission for import of the goods had been granted to Gammon India Ltd. and not to joint venture. The judgment of the Supreme Court in New Horizons Ltd. and Anr. v. UOI - (1995) 1 SCC 478, is referred to in order to say that joint ventures under consideration are recognised to be in the nature of partnership engaged in the joint transaction of mutual profit or association of persons jointly undertaking some commercial enterprise. Depending upon the terms and conditions of the joint venture, it could be a limited private company, a partnership firm or a mere arrangement to execute a particular contract as in the case under consideration. Reference is made to American Jurisprudence (Vol. 46) and Corpus Juris Secundum (Vol. 48A).
6. During one of the hearings, in response to a question that had earlier been put by the bench as to what exactly the legal status of joint venture in Indian law, the departmental representative submitted an opinion signed by the Additional legal Adviser to the Ministry of Law. In this opinion, the Additional legal Adviser has said that the joint venture in question is not a legal entity or a company registered under the Companies Act, 1956. Counsel for the respondent relies upon this opinion to say that it is only the lead partner of Gammon India Ltd., who will be liable for expenses for all the consequences of the import. He further contends that the clarification given by the Department of Revenue will only apply when the joint venture is concerned. The departmental representative also relies upon a Circular dated 7-3-2002 of the Ministry of Finance, Department of Revenue, drawing the attention of the Commissioners to the Explanatory Notes to the budget papers in which it has been clarified (with reference to the exemption notification) to the contractor/sub-contractor for the construction of roads is a joint venture concern. The concession can be availed only in respect of the joint venture and not in respect of imports made by individual partners/constituents of joint venture and this had earlier been the intention of the notification.
7. An application filed by the respondent in taking on record additional documents, consisting of the joint venture agreement, the contract between the National Highway Authority of India and the joint venture, correspondence between the National Highway Authority of India and Gammon India Ltd., and between the Ministry of Road Transport and the Assistant Commissioner and the National Highway Authority of India, has been accepted. It is to be noted that these documents have in fact been referred to in the order of the Deputy Commissioner. These are necessary for full understanding of the issue.
8. It is accepted by both sides that the joint venture with which we are concerned does not have an identity in law different from the identity of each of the partners to it. It is not a company registered under the Companies Act, 1956; nor is it a partnership firm registered under the Partnership Act; it cannot be termed, to a legal person under any other provisions of law, it cannot sue of the suit. Unlike in the U.S.A. where there has been extensive development of case law as to the status of joint venture, such joint ventures do not appear to have attracted in great attention either from the legislative or from judicial authorities. We however do not find it possible to accept the contention of the respondent that the agreement entered into by the National Highway Authority of India was with Gammon India Ltd. and Atlanta Infrastructure Ltd. separately. The preamble to the agreement itself specifically says that it is between "the National Highway Authority of India of the one part and M/s. Gammon-Atlanta (JV) of Gammon House, Veer Savarkar Marg, Prabhadevi, Mumbai - 400 025 hereinafter called "the Contractor" of the other part (M/s. Gammon India Limited is the lead partner of the Joint Venture)." The contract has been signed for and on behalf of the contractor, designated to be Gammon-Atlanta (JV) for Gammon India Ltd. by the Assistant General Manager and also for Atlanta Infrastructure Ltd. It is not possible for us to conclude that it has been entered into by the National Highway Authority of India separately and independently with Gammon India Ltd. and Atlanta Infrastructure Ltd. The certificate dated 3rd August, 2001 of the Deputy Secretary to the Government of India, Ministry of Road Transport and Highways to the Assistant Commissioner of Customs, advising him that the National Highway Authority of India intimated that it was awarded a contract to Gammon-Atlanta (JV), Mumbai, with regard to the project and that it has further certified that "the contractor M/s. Gammon India Ltd., Bombay" shall import the concrete batching plant. This certificate also cannot lead to be interpreted to mean that the contract has not been awarded to the joint venture but to Gammon India Ltd. specifically as a separate entity. In reply to a question from us, the Counsel for the respondent clarifies that the correspondence with the supplier of the goods and placement of orders had been done not by the joint venture but by Gammon India Ltd. He also confirmed that the payment for the goods had been made, not from the joint venture account which has been provided for the contract, but from the funds of Gammon India Ltd. These factors confirm that the importation has not been made by the joint venture but by Gammon India Ltd.
9. We accept the point made by the Counsel for the respondent that the importation has been made by Gammon India Ltd. by carrying out the project which has been awarded to the joint venture. However, that has not answered the objection that the department has raised that the importation has to be made by a contractor for the project. That contractor, clearly, is not Gammon India Ltd.
10. We will now consider the Supreme Court's judgment that is relied upon by the respondent. New Horizons Ltd. filed a writ petition in the Delhi High Court against the decision of the Department of Telecommunications, Hyderabad, refusing to consider the offer made by it in response to a tender for printing telephone directories from Hyderabad. The offer was rejected because it did not submit evidence to show that it had undertaken compiling and printing for supply of telephone directories to the capacity of 50,00,00,000/-, one of the qualifications for tendering. New Horizons claimed that it was a joint venture company established by four companies and that one of these companies was established to publish Singapore telephone directory and yellow pages and other such directories. The Supreme Court concluded that the words in the conditions relating to experience in the tender notice did not justify exclusion of New Horizons Ltd. from consideration. It further said, assuming that this was not so, that it still could not be construed to mean that the experience should be of the "tender in its name only". It came to the conclusion that New Horizons Ltd, was in fact a joint venture as claimed by the tender and therefore, the experience of its various constituents that would be taken into consideration by the tender evaluation committee. It in effect lifted the veil covering on the corporate person to look at the reality. We do not see how this helps the case of the respondent. We are not concerned with the situation in which there is any dispute as to the legal status of the joint venture or of the importer. It is not denied by either side that the joint venture in question is not a separate legal entity. It is nothing other than an association of two persons who have come together to achieve a specific commercial objective. In this case, there is no reality behind the face which is different from what appears before us and we do not have to resort to any such method to discover any reality in existence.
11. Strictly speaking, therefore, the respondent does not satisfy the condition that it had been awarded a tender for import of the goods and the exemption therefore would not be available to the goods imported. The Commissioner (Appeals)'s order has proceeded more on consideration of equity and on application of principles of law. His perception, that if the goods were warehoused by Gammon India Ltd., they could be cleared from the warehouse by the joint venture, has no basis in law. It is settled that an exemption notification has to be strictly construed. We would however, be failing in our duty, if we do not point out that while this conclusion is right so far as this appeal goes, there is a larger issue which has to be addressed by the department. In our opinion the benefit of the exemption cannot be availed of by a joint venture that we have considered. Since it is nothing more than an association of two persons, such a joint venture, not having any identity in law, cannot file a bill of entry for importation of any goods. Such a bill of entry would rightly be refused to be accepted by the department on the ground that the identity of the real importer is not known. This would therefore result in the benefit of the exemption being denied to a joint venture.
12. The appeal is accordingly allowed, the impugned order of the Commissioner (Appeals) set aside and the Deputy Commissioner's order restored.