Customs, Excise and Gold Tribunal - Mumbai
Enjay Hotels P. Ltd. vs Commissioner Of Customs on 8 June, 1998
Equivalent citations: 1998ECR297(TRI.-MUMBAI), 2000(119)ELT108(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. These two appeals are against the orders, dated 28-2-1997 and 28-5-1997 passed by Commissioner of Customs, JCH, Nhava Sheva made in Orders No. S/40-EPCG-161/96 & S/10-16/97 VA respectively. By the said order he had denied exemption claimed by the appellants under Notification 110/95-Cus. in respect of marbles imported by them on the ground that the imported items do not come within the definition of the capital goods as defined under the said notification.
2. Appellants are carrying on the business under the name and style of M/s. Enjay Hotels Pvt. Ltd. They proposed by their letter dated 15-2-1996, to build a 5 star hotel at Sandra (W), Mumbai. For the said project they made an application for import of marble slabs under Export Promotion Capital Goods Scheme to DGFT. The said application of the appellants was for 3 kinds of marble slabs viz. SERPEGGIANTE, GREEL THASSOS, RPSA PASTELLO of the Italian made. For their project they wanted to import the above types of marbles. The appellants stated that the proposed hotel under construction is a 5 star deluxe hotel with a vast lobby and deluxe guest rooms. The floorings and claddings of these areas with marble gives beauty and sense of opulense to the guests especially international visitors. The above Italian marble viz. SERPEGGIANTE (2) GREEL THASSOS (3) RPSA PSTELLO selected by their designers and foreign franchisers reflect their superior taste and style which are not available in the local market. Also the polishing of these marbles are to international standard. The prime areas are therefore, being decorated with these marbles and the remaining areas will have local materials. On the basis of the application, appellants were given EPCG Licence dated 23rd May, 1996 (Page 36 of the Paper book). The Licence provides that they have permission for importation of the marbles slabs of 2 cms thick Random size polished one face. However, they have to export Tourism Related Activity (Hospitality Industry) worth US $ 25,86,080/- in four times cif value of the capital goods of fob prices within a period of 5 years from the date of issue of licence.
3. The appellants imported the goods in January 1997. On their importation they claimed exemption under Notification 110-Cus./95, dated 5-6-1995 on the ground that the imported marbles were capital goods defined under the said notification. The Collector who by the impugned orders rejected said pleas of the appellant holding that they were not entitled to claim of exemption under Notification 110 of 95. Hence the appeals.
4. It is contended by the ld. Counsel Shri Patil, that under paragraph 38 of the EXIM Policy 1992-97 goods under consideration viz. marbles can be imported inter alia with the concessional customs duties at the rate of 15% subject to the export obligations of four times cif value within the period of 5 years from the date of issue of EPCG Licence. He stated that the import licence issued by the DGFT, was issued under paragraph 38 of the EXIM Policy and carried with it an obligation to export to GCA countries four times the value of the CIF value of the imported goods worth fob value within 5 years from the issue of licence. The export of these things should be within freely convertible currency area. He further argued that the definition capital goods provided in Chapter III Paragraph 7 (7) of the EXIM Policy that the item in question came within the said definition and that is required for the services sector, which enabled him to render services as provided in terms of Explanation (1)(c) of the notification. The instant one in any event is included in the term component as provided in the Policy, as indicated in para 7 (10) of the policy as well as under item (1)(c) the Explanation contained in the Notification 110 of 95. He specifically made special emphasis on the fact that the definition of the capital goods contained in the EXIM Policy as well as import policy as well as in the Notification 110/95 are in pari materia and identical with each other. Therefore, when the licence has been issued by the licensing authorities by the DGFT, the Custom authorities cannot deny granting exemption under Notification 110 of 95. He further stated that paragraph 38 of the Policy refers to concessional rate of Customs duty which is contained in Notification 110/95 and binding on the Customs authorities inasmuch as it states that the capital goods (including) 10% of the cif value capital goods may be imported at a concessional rate of customs duty according to the conditions given in the table in the said paragraph subject to an export obligation to be fulfilled over a period of time. He further stresses that when the Govt. of India has made reference to the concessional rate of Customs Duty in para 38 of the Policy it is binding on the Customs Department to give exemptions and to give the concessional rate of duty in terms of Notification 110 of 95. He relied on the judgment of Bombay High Court in the case of Shivshankar Tilakraj v. U.O.I. and Ors. reported in 1987 (28) E.L.T. 342 (Bom.) for the proposition that customs authorities are not empowered to sit in judgments over the power exercised by the office of the Controller of Imports and Exports and also judgment of Tribunal in Vimpex Dyechem v. C.C. - 1992 (62) E.L.T. 741. He further argued that the trade notices or other forms of communication given by the DGFT contained ALC Circular 24/95, dated 18th Oct 1995 is binding on the customs authority inasmuch as in the said circular states that item mentioned in the customs notification for example, 122 of 93 which itemises various items. They only act as a guide and the ALC circular specifically allows to import the same. He even relied on the judgment of the Tribunal in Universal Surgical Traders v. Collector of Customs -1988 (37) E.L.T. page 58 for the preposition that even if an item may not be mentioned specifically in the exemption notification when import takes place such items are entitled to be given benefit of exemption notification. He relied on the observations of the Tribunal on para 5 thereof. Mr. Patil finally stated that as far as import of marbles is concerned recently the SRB of the Tribunal in the case of R.N Rajan & Co. v. CC, Madras -1995 (77) E.L.T. 600 had held that interpretation of DGFT is final in terms of para 20 of the import policy and therefore, it is binding. He, therefore, argues that the grant of licence by the DGFT as well as the clarifications given by the DGFT and this Circular No. 27/C, dated 18 October, 1995 will clearly be binding on the Customs authorities so that the import of the materials in this case would definitely entitled for exemption under Notification 110 of 95.
5. As against this Shri Kumar ld. DR would argue that each and every argument by Shri Patil, the ld. Counsel for the appellant are not correct. He would argue it is true but in this case there have been licence given for the import of the marble. But, it does not mean that grant of licence would enable the appellant to entitlement of the benefit of Notification 110/95. He would argue that to enable the appellant to get the exemption under the notifications the appellant has to satisfy the conditions contained in the notification. Shri Kumar would state that specifically in a emphatic way the definition of the capital goods as contained in the relevant EXIM Policy and the definition of the terms "capital goods" under the exemption notifications are different. He would state that the term capital goods, has been definition under the EXIM Policy in an extensive way, whereas in the exemption notification the same term capital goods has been definition in a restricted way. It is true that the customs authorities in this case have to do two things when an import takes place. Firstly, when the goods are imported, at the time of import the Customs Authorities will look into the licence for valid importation of the same. Secondly, after such importation and satisfying the conditions of the licence, the Customs authorities would look into the licence from the I.T.C. angle, thereafter when any importer claims exemption from Customs Duty, the authorities have to look into the exemption notifications in a strict way. He therefore, states that the Customs authorities have to see from the I.T.C. angle as well as the revenue angle viz. goods imported as such vis-a-vis the exemption notifications. He would, therefore, argue that the customs authorities are not prevented from looking into the exemption notifications and the conditions thereof. He would cite the judgment of the Supreme Court in Sheshank Sea Foods P. Ltd v. U.O.I. -1996 (88) E.L.T. 626. He would state that the customs authorities are entitled to look into and act in accordance with exemption Notification 110 of 95 in terms of the judgment of the Delhi High Court in respect of Exports Apparel Group Ltd. v. C.C. - 1997 (91) E.L.T. 307. He would state that in view of the judgment of the Supreme Court in Sheshank Sea Foods' case, the decision of the Bombay High Court made in Lokas Chemical Works case 1981 (8) E.L.T. 235 is no longer good. He would also state that in similar circumstances the Tribunal in the case of C.C. Nhava Sheva v. Bharat Starch Industries Ltd. - 1998 (97) E.L.T. 159 (Tribunal) in Order No. 2761/97-WRB it has been held that the definition of capital goods in EXIM Policy is wider than the definition contained in Notification 111/95. Similarly in this case, he would argue the term "capital goods", has been defined in a very restricted way inasmuch as the words "directly or indirectly, of goods" contained in the definition in the EXIM Policy is absent in the term "capital goods" contained in the Notification 110/95, therefore, the appellants arguments that the terms "capital goods" are more or less similar or in pari materia is not correct.
6. We have considered the rival submissions. In terms of the above arguments it is found that the DGFT has given EPCG Licence for the import of the above 3 categories of marbles from the general currency area. The goods had arrived in Bombay in January, 1997 the bill of entry was filed on 3rd March 1997. They claimed exemption in terms of 110/95. The terms "capital goods" have been defined under para 7 (7) of the EXIM Policy as under:
"Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. Capital goods also include packaging machinery and equipment, refractories, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, and equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericultue as well as for use in the services."
Paragraph 38 of the EXIM Policy mentions about the import of the goods on concessional duty which reads as under:
"38. Capital goods (including spares upto 10% of the CIF value of the capital goods may be imported at a concessional rate of customs duty according to the conditions given in the table below subject to an export obligation to be fulfilled over a period of time. The period for fulfilment of export obligation shall be reckoned from the date of issue of the import licence:
Duty Export Obligation Period 15% CIF value 4 times CIF value 5 yrs Zero duty (in case CIF value 6 times CIF value 8 yrs is Rs. 20 crores or more)
The export obligation shall be on FOB basis. However, in the case of zero duty imports, the licence holder may apply for fulfilment of the export obligation by exporting 4 times the CIF value of the capital goods on FE basis within a period of 8 years. The provisions of paragraph 138 of this Policy shall apply for calculating the export obligation on NFE basis."
The term "capital goods" have been defined under Notification No. 110/95 which is described below. We also extract definition of "capital goods" contained in table in the said notification.
"TABLE
1. Capital goods.
2. Capital goods in SKD/CKD condition to be assembled into capital goods by the importer.
3. Components of capital goods required for assembly or manufacture of capital goods by the importer.
4. Spare parts not exceeding 20% of the value of goods specified at serial Nos. 1, 2 and 3 actually imported and required for maintenance of the capital goods so imported, assembled or manufactured."
5. Explanation. - In this notification:
(i) "Capital goods" means any plant, machinery, equipment and accessories required for -
(a) manufacture or production of other goods, including packaging machinery and equipments, refractories, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, and equipment and instruments for testing, research and development, quality and pollution control;
(b) used in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericulture;
(c) rendering services;"
It is the argument of the ld. Counsel that the marble is a component part of the capital goods, which is required for assembling or manufacture of capital goods by the importer. He says the entire imported goods come within the terms capital goods meaning thereby it is a part of a plant and he would say that the entire hotel project itself is a plant by having marbles in the floorings and rooms and other places gives a position of beauty and sense of oppulense especially to the guests and international visitors. It also reflects a superior tastes and style which will not available form the local material. He would stress that in terms of the EPCG scheme he had undertaken to export 4 times the value of imported goods. Foreign exchange involved in importing this material. Therefore, he is entitled to the benefit of the notification. When we see the actual wordings of the terms capital goods contained in EXIM Policy as well as the notification it will be clear that words "either directly or indirectly" contained in the definition of the EXIM Policy are absent in the meaning of capital goods contained in Explanation to notification. No doubt in the impugned order the Collector has held as follows :-
"I have carefully gone through, the records of the case and also considered the averments made by the importers during the personal hearing. To be eligible for concessional rate of duty under Notification No. 110/95 Cus. the goods have to squarely fall within the scope of that notification. In taxing statutes, nothing can be assumed nor can anything be interpolated. In this case, the issue is whether Marble Slabs come within the scope of Notification No. 110/95-Cus. For getting the benefit under Notification No. 110/95-Cus. all the conditions and not merely the condition of the goods covered by a valid EPCG licence, have to be satisfied. I hold that the goods in question do not fall in any of the categories to the said Notification. The benefit of concessional rate of duty cannot be therefore, extended to the said goods. The other arguments of the importer are not relevant."
6. In the said order he has held that the benefit under notification or the conditions contained in the notification has to be specified. He has not described as to how the conditions are being specified. One of the conditions contained in the notification is the existence of licence issued under the EPCG scheme that is reflected into the notification which is present in this case. That nobody denies it. The second condition is execution of legal undertaking in terms of Clause (3) of the exemption notification. That also nobody denies. But is it sufficient for the importer to claim exemption under the notification. The imported goods must necessarily come within the term "capital goods" as given in Explanation to the notification i.e. it must be a component of the capital goods. Can we describe marble as a component of a plant.
7. The term plant has been dealt with by some cases but those cases to our mind do not give correct clue to decide the instant case, especially the case of Commissioner of Income Tax v. Taj Mahal Hotel - AIR 1972 SC 168 in which the respondent installed sanitary and pipe-line fittings in one of its branches in respect whereof it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of 'plant' given in Section 10(5) of the 1922 Act which was similar to the definition given, in Section 43(3) of the 1961 Act and the Supreme Court after approving the definition of plant given by Lindley, L.J. in Yarmouth v. France (1887) 19 QBD 647) held that sanitary and pipeline fittings fell within the definition of a plant. It may be mentioned that the term plant has been defined in the Yarmouth case as follows : "There is no definition of plant in the act, but in its ordinary sense it includes whatever apparatus is used by a businessman for carrying on his business - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business." In our view the above judgment has been rendered in terms of the provisions of the English Employer's liability Act, 1880. In our view the theme of that Act has not been demonstratively shown to be similar to the same as the preamble to the Customs Act. Over and above words contained in one Act which has been interpreted should not be followed in respect of the words contained in another Act for the scheme of both acts are entirely different. It has been held in Macbeth v. Chislett -1910 A.C. 220 as follows :
"It would be a new terror in the construction of acts of parliament if we were required to limit a word to an unnatural sense because in some Act, which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone. Macbeth v. Chislett (1910) A.C. 220-23."
8. In the Craise on Statute Law 6th edition at p.164 it has been observed as follows : "In construing a word in an Act caution is necessary in adopting the meaning ascribed to the word in other Acts." The above observations and the craves have been approved by the Supreme Court in the case of MSCO P. Ltd. v. UOI - AIR 1985 (S.C.) 76 P.78. The ld. Counsel Shri Patil invited our attention to the term "plant" defined under various dictionaries and books.
"McGraw Hill 4th Edition:
"Plant: The land, buildings, and equipment used in an industry."
Academic Press Dictionary of Science and Technology:
"Plant" : An Engineering Production facility, a factory, electric power station or the like.
"Words and Phrases, Permanent Edition Vol. 7A"
"Plant" : is an all embracing term expressive of land, buildings, and the equipment of the business conducted on the premises. Plant is an entity itself, wholly distinct from the land, buildings, machinery and appliances which compose it."
The word "plant" has not been identically defined in any of the various dictionaries. The importers can get benefit of the exemption notification only if the marble can be considered as a component of a plant within the meaning of the term plant as defined in the notification. As stated earlier, the definition contained in the EXIM Policy is different from the definition of the term capital goods in the notification. While in the EXIM Policy it has been defined in the extensive way whereas in the Notification it has been defined in the restrictive way. This is the interpretation given by the Tribunal in Bharat Starch Industries Ltd. 's case which we follow. Unless the appellant in this case proves that the term "plant" is inclusive of the term marble, he cannot derive the benefit of the notification. We may say so that the utilisation of the marble may give beauty and sense of opulence as well as its polish may be of international character so that its use directly or indirectly in the project may enable him to earn foreign exchange through the hotel project. As indicated above earlier, the term "directly or indirectly" contained in the definition of the term capital goods in the EXIM Policy are absent in the definition of word "capital goods" defined under the Notification 110/95. Even if the marble may directly or indirectly earn foreign exchange, that may help him to get the goods cleared from I.T.C. angle without any penalty. But that does not enable him to get benefit of the exemption.
9. Moreover in the case benefit of doubt cannot be given to the assessee as this is a case of interpretation of exemption Notification as held by the Supreme Court in Novopan's case - 1994 (73) E.L.T. 769 (S.C.).
10. The goods here is a well known one viz. marble. Can we say that it comes within the definition of capital goods in terms of the notification. We have to state that the term "capital goods" have been defined under both EXIM Policy as well as the notification. In the notification it has been received in a restricted way as has been held by Tribunal in the case of Commissioner of Customs, J.N. Port Trust v. Bharat Starch Industries Ltd. supra while considering the same and other arguments in respect of Notification 111/95 of where the Tribunal has held as follows : "We may also note that so far as the licensing authority is concerned, the licensing policy 1992-97 contains the definition of capital goods which is much, wider than in the explanation to the Notification No. 111/95 of the import policy definition defines capital goods inter alia as meaning plant, machinery and equipment or accessories required for manufacture or production either directly or indirectly of goods or any rendering services. Such a wider definition not being available in the exemption notification the argument that when any specific licence under EPCG has been produced the exemption has to automatically follow is not well founded".(emphasis supplied).
This argument of the ld. counsel therefore, in this regard as to as we never found the term plant has been used in a wider scope in the EXIM Policy than in the exemption notification. The Customs Authorities are considering the exemption Notification. Therefore we are following the said judgment of the Bharat Starch Industries Ltd.
11. In the case of Exports Apparel Group Ltd. the Delhi High Court 1997 (91) E.L.T. 307 had held that it is for the customs authorities to examine the goods that have been imported in terms of the licence and for and the duty of customs if any, is leviable thereon in terms of Notification 203 of 92 issued under Section 25 of the Customs Act. At para 10, 11, 12 and 13 the High Court has held as follows :
"10. As to what is the effect of the Circular dated 27 April, 1994 issued by the Directorate General of Foreign Trade giving guidelines in respect of duty-free licences issued under duty exemption scheme would certainly be examined by the authorities adjudicating under the Customs Act. One thing is, however, clear that the guidelines issued by the C.B.E.C. by its impugned circular dated 9 May, 1994 would appear to be valid as it merely enjoins upon the adjudicating authorities under the Customs Act to act in accordance with the exemption notification issued under Section 25 of the Act.
11. The guidelines issued by the Directorate General of Foreign Trade and that by the Central Board of Excise and Customs may appear to be in conflict, but then the Customs authorities have to act as per law and the Notification No. 203/92 issued under Section 25 of the Customs Act, 1962, is a law. Under the Government of India (Allocation of Business) Rules, 1961, issued under Clause (3) of Article 77 of the Constitution, all matters relating to the Customs Act and notifications issued thereunder are to be dealt by the Department of Revenue in the Ministry of Finance, Govt. of India and that under the Foreign Trade (Development & Regulation) Act, 1992 but the Department of Commerce in the Ministry of Commerce, Govt. of India. Then, in the Govt. of India (Transaction of Business) Rules, 1961 also issued under Clause (3) of Article 77 of the Constitution, it is provided as to how the business allotted to a department is to be disposed of by, or under the general or special direction of the Minister-in-Charge of the Ministry and the inter-departmental consultations when a subject concerns more than one department, and also previous concurrence of the Ministry of Finance in certain cases and particularly when the order involves any abandonment of revenue.
12. We further find that the adjudicating authorities have not been made parties to the writ petition. It would have been more appropriate if the Assistant Collector of Customs had been made a party whose action is sought to be challenged.
13. After examining all the provisions we are of the view that the stand taken by the respondents is correct. It is for the Customs Authorities to examine if the goods had been imported in terms of the licence, and what duty of Customs; if any, is leviable thereon. If aggrieved, the petitioner has remedy under the Act by way of appeal. In this view of the matter also we do not wish to go into the merit of the controversy as any observation made by us may prejudice the case of either of the parties. We will, therefore, dismiss the petition."
From the reading of the above it will be very clear that the Customs Authorities have to do their duty of considering and interpreting the exemption notification in terms of the goods imported and it will not be disharmonious approach as a Government as a whole and the Central Govt. will not be following any uniformity in approach as contained in Article 77(3) of the Constitution. This has been fully explained in para 11 of the said judgment of the Delhi High Court which has been extracted above. In fact the Tribunal when it passed the Order No. 2761, dated 7-7-1997 in the case of Bharat Starch Industries Ltd. has followed the said judgment of the Delhi High Court. Respectfully following the Delhi High Court judgment (supra) we would hold accordingly. We therefore, reject the contentions raised by the ld. Counsel Shri Patil for the appellants. No doubt the ld. Counsel has cited the judgment of the Tribunal in Universal Surgkal v. C.C. -1988 (37) E.L.T. 58 for the preposition that in respect of the goods which are not itemised in terms of notification yet the Tribunal allowed importation of such a goods as stated earlier. The said case of the Tribunal has to be confined the facts of the case only. In the teeth of the judgment of the Delhi High Court in Exports Apparel Group Ltd. (supra) and the judgment of the Tribunal in Bharat Starch Industries we cannot accept the stand of the appellants. We therefore, dismiss the appeal upholding the impugned order.
12. Both the appeals are dismissed.
Sd/-
(G.N. Srinivasan) Member (J) Gowri Shankar, Member (T)
13. I regret my inability to agree. The Commissioner, in his order, has not given any reason for his conclusion as to why the marble slabs did not come within the scope of Notification 110 of 95. He merely reproduced the definition of the capital goods contained in the Explanation to the notification and concludes, without assigning any reason that the goods are not covered by any of the categories.
14. Capital goods are defined in the notification as meaning any plant, machinery, equipment or accessories required for any of the three purposes mentioned therein. Marble slabs, in question, cannot be considered to be machinery, equipment or accessories. The question is, is it plant ?
15. The term "plant" has not been defined in the Explanation. Appellant has referred to the definition of the term "plant" occurring in various dictionaries, in support of its contention, used in industry comprises of a plant. Now the three definitions which are cited in page 13 of the order proposed by Member (Judicial) are in agreement that the term "plant" includes building used in a industry or a business, or with reference to its meaning in the field of science and technology to house an engineering production facility such as a factory or electric power station. Each of the definitions therefore includes in the term "building or civil structures". McGraw Hill Dictionary and the "Words and Phrases" specifically mention building; the reference to factory, electric power station or like which cannot exist without a civil structure in the Academic Dictionary of Science and Technology makes it clear that the building housing the actual production of machine or machinery which perform the function of production is part of the plant. I am therefore of the view that, in the context of the notification, the term "plant" would include the building, and parts of the building. Doubtless, the definition of the term "plant" in the policy is wider, in that it includes goods used directly or indirectly. However, directness or otherwise of the use does not come into question in this case. A hotel, as a commercial, entity or a physical structure, cannot exist without walls and floors and there is no dispute that the marble slabs in question will be used to clad walls and floors. Marble is therefore used directly in the hotel.
16. In my view, the ratio of the Tribunal's decision in Commissioner v. Bharat Starch Industry, an unreported decision, has no direct bearing on the issue of whether the goods in question are a plant or not. The Tribunal said in that decision that, in applying a notification, what is to be considered is the definition of a term in the notification and not the definition in the import policy. The appellant before us does not base its claim in the definition of the policy alone; that is pressed into service as a adjunct. What is claimed is that the goods are plant within the meaning of the Customs notification.
17. The judgment of the Supreme Court in Commissioner of Income Tax v. Taj Mahal Hotel - AIR 1972 SC 168 in which the Court held that sanitary and pipeline fittings fall within the term "plant" in the Income Tax Act has been distinguished on the ground that the scope of the term "plant" in the Income Tax Act and the Customs Act are not shown to be the same. However, subsequent to the order written by Member (Judicial), the Tribunal in Vivek Alloy Co v. C.C.E. - 1998 (24) RLT 427 noted that for the purposes of Income Tax Act, capital goods would include "appliances used for the purposes of trade and business" and noted that the Supreme Court in the Taj Mahal Hotel's case held that the term "plant" comprehends building employed in carrying on trade or other industrial business and that therefore the sanitary pipelines fitting of the hotel fell within the expression "plant". It held therefore that the term "capital goods" occurring in the Explanation to Rule 57Q which follows quite a different scheme would not include building.
This decision of the Tribunal however is of relevance in deciding the scope of the term "plant" in the notification with which we are concerned. The notification speaks of "plant" with reference to manufacture of goods or providing services. The entity or organisation that provides services in this case is a hotel. The object of the notification, and import policy in conjunction with which it is issued is to provide reliefs to units which contribute towards earning foreign exchange by any one of the methods specified in the policy and in the notification. In this context, therefore, it would be appropriate to apply the definition of the term "plant" as it occurs in the Income Tax Act. It would then follow that on the analogy of the pipe fitting considered in the Taj Mahal Hotel's case, the marble slabs would qualify as plant.
18. One must not, in my view, lose sight of the fact that the notification and the import policy go hand in hand, and both of them subserve the same purpose. It does not follow from this that meaning to be attributed to the particular term in the notification must be identical with the meaning attributed to that term in the import policy. It would however be perfectly legitimate, and indeed required, to construe the term occurring in the notification in the context of the policy.
I am therefore of the view that the goods in question are covered by the notification and no duty was therefore payable on it..
Appeal allowed.
Sd/-
(Gowri Shankar) Member (T) DIFFERENCE OF OPINION In view of the difference of opinion between the two members, the following question as referred for decision by a third member to be nominated by the President:
"Do marble slabs imported by the appellant come within the term "plant" as specified in the Explanation to Notification 110 of 95."
Sd/-
(G.N. Srinivasan) Member (J) J.N. Srinivasa Murthy, Member (J) The difference of opinion in the Bench Order No. 1167-68/98-WZB, dated 8-6-1998 was referred to me by the Honourable President under letter dated 11-2-1999 to hear the same and answer the question raised in the said order whether "Do marble slabs imported by the appellant come in the term "plant" as specified in explanation to Notification 110/95. On the receipt of the file, both sides were notified, and both sides were heard. The facts of the case are dealt with in the Bench order in paragraphs 1 to 3 in pages 1 to 3, which is not required to be narrated again.
19. Shri M.H. Patil, the ld. Counsel for the appellant has submitted in the course of the arguments that the appellant has imported marble slabs as capital goods under paragraph 7(7) of the EXIM Policy of 1992-97 under EPCG licence issued by the DGFT authorities for his five star hotel as a hospitality industry, engaged in tourism, development activities and also provides services. The benefit of Notification No. 110/95-Cus., dated 5-6-1995 as claimed, regarding the duty concession on the polished marble slabs imported from Italy under the definition of the capital goods thereunder. The licence was issued, after the scrutiny by the committee, consisting of Ministry of Finance, Commerce and Customs department. A export obligation was also attached to the licence under the said scheme. The marble slabs imported were used to decorate floors and surrounding inside walls in the hotel building. The proposed hotel under construction is a five star deluxe hotel with vast lobby and deluxe guest room. The flooring claddings in these areas are fixed, polished designed (one side) with marble slabs for beauty and by ways of opulence to the guests and international visitors. The 3 varieties of marble slabs described in the invoice were selected by the designers and foreign franchises, reflected their superior taste and style, not available in the local market. Polishing of these marbles is to international standard. The prime areas are being decorated with these marbles, and remaining area will have the local materials. The import under the EPCG licence is upheld by the department and the benefit of notification is denied in the order in original, even though the said material was required for rendering services to develop tourism and attract the international tourist and get foreign exchange and perform the export obligation. Items 1 to 3 and explanation (1)(c) in the notification referred above covers the case of the appellant, which is rendering hospitality services, and marble slabs come under the category of the component of a plant, as the marbles of the hotel building. Entire building is a plant. The DGFT has examined it in detail. The application for licence was issued after the decision of the committee. It is sufficient to get exemption as per 1992 (62) E.L.T. 741; 1992 (57) E.L.T. 563 (Cal.); 1994 (73) E.L.T. 32 and 1987 (28) E.L.T. 342 (Bom.). The plant is not defined anywhere. The dictionary meaning of the plant in the normal usage, as discussed by both the Members of the Bench, has to be accepted. The general exemption no. 76 and ALC Circular 24/95, dated 18-10-1995 and the Notifications 110, 111 & 130/95 regarding the capital goods rendering services, and the items supports the case of the appellant. The absence of the wording "directly or indirectly" in the notification is immaterial which refers to the manufacture of goods, and it has nothing to do with the rendering of the services, as the marbles are directly used. The utilization of it is not disputed. The discussion in paragraph 3 at page 19 by the ld. Technical Member of the latest case law 1998 (24) RLT 427 in the case of Vivek Alloy Co. v. C.C.E. under paragraph 4 supports the case of the appellant in paragraph 10 to 15 of the order. In 1998 (97) E.L.T. 159 it is mainly based on the licence of DGFT and there was no issue regarding the plant. The EXIM Policy is treated only as a adjunct, and the notification is relied on by the appellant in the main. The decision of the Supreme Court in Shashank Sea Foods Pvt. Ltd. and 1997 (91) E.L.T. 307, Delhi High Court in the Export Apparel case, it is held that the customs officers can investigate on the licence, but not its correctness or competence of the authority. The other angle of examination is for the purpose of levying customs duty on the imported marbles slabs under the EPCG Licence. Marble slabs within the meaning of the plant and is a capital goods. The decision of Bharat Starch case is distinguishable on various counts. How the notification is required to be interpreted is elaborately dealt within 1997 (94) E.L.T. 449 and 1997 (91) E.L.T. 34 (S.C.) which deals with only the manufacture of goods and not for rendering services.
20. Shri K.M. Patwari, the ld. JDR has submitted in writing that the observation of the ld. Technical Member in paragraph 6 of the order is contrary to the views of the Tribunal in 1998 (97) E.L.T. 159 in the case of If Commissioner of Customs, J.N. Port v. Bharat Starch Industries. The Delhi High Court has held in case of Export Apparel Group Ltd. and it is for the Customs Authorities to examine the goods exported in terms of licence for the customs duty in terms of Notification 203/92. In Novopan's case in 1994 (73) E.L.T. 769 the Supreme Court has held that interpretation of the exemption notification vest with the Customs authorities. The decision of the Supreme Court in AIR 1972 SC 168 in the case of Commissioner of Customs v. Taj Mahal Hotel was filed the purpose of Development Rebate, and related to the matter concerning the direct tax, where sanitary and pipeline fittings was considered as plant under the Income Tax Act. The decision in Vivek Alloy Co. v. C.C.E. relied to for the purpose of Modvat credit on capital goods under the Central Excise Rules, whereas in this case, there is purely a question of interpretation of notification whether the imported marble slabs fit in the definition given in the explanation in the Notification 110/95 under Customs Act, which is not defined thereunder. He has further contended that applying the doctrine of Noscitur a sociis, the sentence are not mere collection of words, taken out of the sentence separately by reference to the dictionary, and then put back in the sentence with the meaning, which one has assigned to them as separate words. The meaning of the word is judged by the company it keeps. When 2 or more words, which are susceptible of analogous meaning, are coupled together they are understood to be used in their cognate sense. Associate words take their meaning from one another. The dictionary meaning of the plant cannot be brought into, to ring that the marble slabs are plant. As observed by the ld. Judicial Member words contained in one act should not be followed in another act (Paragraph 12). It is also observed that the words directly or indirectly are missing in the notification, which is narrower aid restricted one than the EXIM Policy. All matters concerning the exemption of duty are to be dealt with by the Department of Revenue Ministry of Finance as per the allocation of business Rules, 1961 under Government of India as observed in paragraph 11 of the order. The only point in dispute is whether the marble slabs is a capital goods under Notification No. 110/95 and importability is not in dispute. The appellant's hotel is not a factory for the production of licence by the excise authorities, as per paragraph 6 of the notification. The policy is clear regarding the capital goods and plant. As per 1996 (81) E.L.T. 349 paragraph 46 the interpretation of the notification must be made by the customs authorities for the purpose of levy of customs duty. The customs authorities have to satisfy themselves that the conditions of the notification are complied to grant exemption thereunder. The finding of the ld. Judicial Member in paragraph 11 of the order is proper and correct. The marble slabs in this case is not a capital goods as held by him.
21. The ld. Counsel for the appellant has replied that the decision in Taj Hotel case that sanitary pipe and fittings rendering service in a hotel is coming within the definition of the capital goods and thereby the concessional duty under the notification is granted. The definition of the capital goods in the Policy and the notification has identical meanings. Hospitality services is relevant. The interpretation of the notification for the grant of concessional duty under Notification 110/95 supports the case in Vivek Alloys in which Taj Hotels case is relied on. That can be relied upon in this case as to the interpretation of the meaning of the word plant in the absence of a decision under the Customs Act. The Policy is in favour of the appellant. Classification is not involved. There is no ambiguity to apply the doctrine as contended by the JDR and it is not helpful in this case. There is no dispute about the installation of the marble slabs in the hotel industry of the appellant.
22. From the question raised in the Bench order, it is seen that the explanation to the Notification 110/95 has to be examined to answer the question raised whether marble slabs imported by the appellant comes within the term plant. The Notification No. 110/95, dated 5-6-1995 has to be considered first. According to that notification, the concessional rate of duty for import under EPCG scheme is provided under Section 25(1) of the Customs Act by the Central Government, being satisfied that it is necessary in the interest of public so to do by examining the goods specified in the table annexed hereto of duty leviable thereupon specified in first schedule of the Customs Tariff Act, 1975 as is in excess of amount calculated @ 15% ad valorem and whole of the additional duty leviable thereon under Section 3 of the Customs Tariff Act, subject to certain conditions. Export obligation fulfilment equal to the 4 times the CIF value of the goods imported or for such higher sum as may be fixed by the licensing authority within a particular period from the date of issue of said licence in preparation. In that regard, a bond has to be executed with a surety or security in such form and for such sum and with such surety specified by the Asstt. Commissioner of Customs. Under condition No. 6, the capital goods imported assembled or were manufactured or installed in the importers factory and a certificate from the Jurisdictional Asstt. Commissioner, Central Excise should be produced within 6 months from the date of completion of imports or condition such extended period allowed by the Asstt. Commissioner of Customs. Under the table item No. 1 capital goods is eligible for such concessional rate of duty imported under a scheme under a valid licence in condition No 1. In the explanation to this notification under the table the capital goods is defined in Sub-clause (i) meaning any plant machinery equipment and accessories required for manufacture or production of other goods including packaging machinery and equipments etc. and used in manufacturing, mining, agriculture, aquaculture, etc. and third category is for rendering services. The notification refers to Export and Import Policy from 1-4-1992 to 31-3-1997 revised in March, 1995 duly published by the Government of India and Ministry of Commerce and the DGFT with the licence authority for the purpose. Under the Clause 5 Export obligation in relation to the importers other than those rendering services meant export of a manufactured product with use of capital goods imported assembled or manufactured under its notification to a place outside India. Regarding the importers rendering services means receiving payments in freely convertible foreign currency for services rendered through use of such capital goods.
23. So from the above notification it is apparent that to get the benefit the goods imported must come under any one of the categories and in this case admittedly goods under the category of plant rendering services with the export obligation of receiving payments in freely convertible foreign currency through the usage of the imported capital goods. The import of the marble slabs and its utility by the appellant in their five star hotel to the floors and caddies in the guest rooms and the main portion of the hotel is not in dispute. The policy referred in the notification also defines capital goods in paragraph 7(7). The portion of the said paragraph pertaining to manufacture of production either directly or indirectly of the goods is not applicable to the instant case on hand as the imported material is already a manufactured product only to affix to the walls and the floors in the hotel of the appellant. So the observation of the ld Judicial Member regarding the difference of the meaning of the capital goods in the Policy of the notification does not help in this case. When no manufacture is involved from the imported goods, excluding that portion, the remaining portion of the meaning capital goods in paragraph 7(7) of the Policy does not differ much pertaining to the facts of the case i.e. for rendering services as well as for use in service sector. The licence is issued under the EXIM Policy by the DGFT. The appellant comes in the purview of service provider under paragraph 36A of the Policy as a person providing supply of service from India to the service consumer of any other country in India, The main purpose of the establishing 5 star hotel is to attract the international customers by providing attractive affixures in the building and to earn the free convertible foreign exchange benefit as an obligation for having obtained the licence for the import of the marble slabs from Italy. The notification and the EXIM Policy goes hand in hand in that regard as held by the ld Technical Member, in view of the conditions mentioned in the notification, which are relevant to the Policy under which the licence is issued. The notification cannot be isolated to interpret regarding the grant of exemption on a concessional rate of duty on the imported goods under the said notification. They are inter-linked with each other and they cannot be separated as held by the ld. Technical Member.
24. From the contention of the both sides and the Bench order, it is apparent that the plant or is not specifically and clearly defined in the notification. In the absence of it, how it is to be meant has to be considered in the light of the case laws cited in this case by both sides, (a) AIR 1972 SC 168 in the case of Commissioner of Income Tax v. Taj Mahal Hotel under Clause B it is held in paragraph 6 that "where the definition of a word has not been given, it must be construed in a popular sense. If it is a word of everyday use popular sense means the sense with which the people are conversant and with the subject matter with which the statute is dealing when attribute to it. This is regarding the interpretation of the statute and the construction of undefined word. The plant is defined under Section 10(5) of the Income Tax Act and that is considered in the judgment and ultimately it is held that plant includes sanitary fittings and pipelines installed in a hotel. The meaning of "includes" is interpreted in this judgment. In paragraph 8, the necessity of the sanitary fittings in a hotel is considered to attract the definition of plant within the Section 10(vii)(b) read with Section 10(5). So this judgment supports the contention of the appellant about the necessity of affixing the marble slabs in the flooring caddy in the hotel to attract the customers in the business of hotellier earning under larger profit by charging higher rates for the use of the rooms. The contention of the ld. JDR that the said ruling does not apply on the instant case on hand as it is considered under the Income Tax Act, regarding the Development. Rebate does not preclude the ratio of the case to be applied to the instant case on hand, winch flows as a general principle laid down are not with reference particularly for income tax. In the absence of any direct decision under the Customs Act, this ruling can be applied to appreciate the case on land, (b) 1986 (24) E.L.T. 426 in the case of Grindwell Nortan Ltd. v. C.C. does not apply to the instant case on hand as it deals with the distinction between parts and accessories of integrated system and its classification under Customs Tariff Act, as the marble slabs is claimed under the plant only, (c) 1987 (91) E.L.T. 34 (S.C.) in J.K. Cotton Spg. & Wvg. Mills v. Sales Tax Officer, Kanpur deals with the building materials used for construction of plant and it is held that building materials cannot be used as plant in the manufacture of goods. It was considered under the Central Sales Tax, 1962 corresponding to the Rule 57A & Q of Central Excise Rules leading to Modvat credit vide paragraph 11. This decision is not relevant to the instant case on hand because the question of manufacture is not involved in this case, (d) 1997 (94) E.L.T. 449 (S.C.) in the case of Oblum Electrical Industries P. Ltd. v. C.C., Mumbai deals with the interpretation of taxing statute regarding the exemption and has held that "wordings in the notification have to be construed keeping in view of the object and purpose of the exemption under Section 25(1) of the Customs Act (paragraph 11). The role of explanation is also considered and held in paragraph 12 that it is a well settled principle of statutory construction that the explanation must be read as to harmonize to clear any ambiguity in the main provision. This decision helps in this case for interpreting the Notification 110/95. (e) 1998 (97) E.L.T. 159 in the case of Commissioner of Customs v. Bharat Starch industries, in which the Customs Notification 111/95 is considered in paragraph 10 and 11. According to it, goods imported under EPCG licence should satisfy the requirement laid down in the exemption notification to qualify for concessional assessment envisaged therein. "It is noted that production of EPCG licence is only one of the conditions for eligibility. The licensing Policy 1992-97 contains the definition of capital goods which is much wider than that in the explanation to Notification No. 111/95. The import policy definition defines capital goods inter alia as meaning plant, machinery, equipment or accessories required for manufacture or production either directly or indirectly of goods or in rendering services. Such a wide definition not being available in the exemption notification, the argument, that when any specific licence under EPCG has been produced, the exemption has to automatically follow, is not well founded. The customs authorities will be within their rights to ensure that the goods imported answer the definition of capital goods given in the explanation to notification for the purpose of granting the exemption to the goods." This case law is not of help in this case, and the contention of the appellant is altogether different than the one that is held in this case. There is no automatic claim for the concessional rate of duty for the EPCG licence. The appellant claims that the conditions necessary for the availment of the benefit of the concessional rate of duty on the marble slabs have been complied in Clause 1 and 3 and Clause C(i) of the notification, which is .also not in dispute.
25. The decision in (f) 1992 (62) E.L.T. 741 does not apply to the instant case on hand which deals with the certificate of a drug controller produced by the importer certifying tartaric acid to be a bulk drug, sufficient to entitle the importer to get the benefit of Notification 234/86 in the case of impex Dye Chem. In this case the question of furnishing certificate does not arise, (g) 1994 (71) E.L.T. 32 in the case of Litho Press v. C.C. deals with the certificate of DGTD to be given due weight and not to be brushed aside lightly also does not apply to the instant case on hand as there is no certificate, involved in this case, (h) 1992 (57) E.L.I. 563 Asiatic Oxygen is relied on this case, (i) 1996 (88) E.L.T. 626 in the case of Shashank Sea Foods v. U.O.I, it is held that the customs authorities can also conduct investigation over breach of a condition of an exemption Notification No. 116/88 vide paragraph 9 & 10. There is no dispute in this regard in the instant case. This ruling is relied on in paragraph 6 of the order by the ld. Judicial Member and in paragraph 7, the Supreme Court judgment in Taj Mahal Hotel is also considered.
26. According to the appellant, there is a vast lobby and the hotel is a deluxe one and the flooring and the cladding of the hotel with marble slab is necessary to give beauty and sense of opulence for a superior taste and style with international standard and polishing on one side. The case of the appellant is one of tourism related activities, and it is a hospitality industry. There is some meaning in the contention of the appellant that the licensing authority has examined in detail under a committee before sanctioning the licence on the claim of the appellant. It does not mean that automatically he should get the concessional rate of duty benefit. The ITC angle regarding the import of marble slabs is conclusive. The correctness and the competence cannot be questioned in these proceedings. From the view of the customs duty, customs authorities have to examine the goods for levy of the proper customs duty, which is in their purview. It is observed in the impugned order dated 28-2-1997 that on the 1st check appraisement procedure the goods confirmed the declared parameter in the order. In paragraph 10 of the order, the ld. Judicial Member has observed on the decision referred above in Bharat Industries. 1997 (91) E.L.T 307 - Export Apparel Groups Ltd. (Delhi High Court) enables the customs officers to examine the goods as per licence and levy of customs duty under Section 25 of the Customs Act. So there is no bar for the customs authorities, even in this case, and it is also not disputed by the appellant. The decision of the Tribunal in 1988 (37) E.L.T. 58 in the case of Universal Surgical v. C.C., does not improve the position from the above decision as the importation was allowed of non-item goods in terms of notification in that case.
27. The discussion of both the ld. Members in the impugned order regarding the meaning of the plant under the dictionary meanings is relevant. The observation by the ld. Technical Member regarding the difference in the definition of the capital goods in the Policy and the notification is agreeable. Regarding the Bharat Starch case, it only deals with the definition of the term in the notification that it prevailed over the policy is equally applicable to the instant case, as the appellant's main claim is only on the notification, and not the policy. As considered and held in paragraph 5 of the order of the ld. Technical Member, the latest decision in 1998 (24) RLT 427 in Vivek Alloys Co. which Taj Mahal's case is considered and it was held that building is a plant. The contention of the ld. JDR that the ruling does not apply to the instant case on hand as it is dealt with under Rule 57Q under a different scheme does not hold good, as already held that the general principles laid down in the decisions can be applied, which do not pertain to at particular act. The discussion in page 22 in the Bench order is relevant to consider the scope of plant in the notification. Evidently, hotel provides services to tourists, which contribute towards the earning of the foreign exchange by any one method mentioned under the notification. The analogy of the decision under the income Tax is applicable to the instant case on hand. The hotel is a hospitality industry providing services and earning free convertible foreign exchange to meet export obligation under the notification. As observed in paragraph 6 of the order, notification and a Policy serves the same purpose. The term in the notification has to be construed in the context of the Policy. From the facts and circumstances of the case, it is seen that the views of the ld. Technical Member regarding the benefit of concession and rate of duty under the Notification 110/95 is quite logical and preferred to be agreed in the light of the EXM Policy and the wordings of the notification. The contention of the JDR regarding the interpretation of the wordings in the notification under the doctrine of Noscitur a sociis that the meaning of the word is judged by the company it keeps holds good. But, the wordings of the notification does not give analogous meaning. The purpose for which the notification is issued with condition has to be complied to get the benefit of concessional rate of duty has to be borne in mind in interpreting it. In the instant case, the facts and circumstances show that the appellant has fulfilled the condition of the notification and the explanation as discussed above.
28. In view of the discussion made above I answer the question involved in this case in the affirmative, and I agree with the orders of the Honourable Technical Member. Registry to place file before the proper authority for further action.
Sd/-
J.N. Srinivasa Murthy Member (J) Dated: 27-12-1999 ORDER In view of the order of the third Member, we hold that the marble slabs imported by the appellant come within the term "plant" specified in the explanation to Notification 10/95, allow the appeal and set aside the impugned order.