Customs, Excise and Gold Tribunal - Tamil Nadu
Cc vs Master Trading Co. on 3 October, 1996
Equivalent citations: 1997(70)ECR138(TRI.-CHENNAI)
ORDER
V.P. Gulati, Vice-President
1. The issue in the appeal relates to the assessment of "tape to tape sound transferring machine" under the Project Import Regulations (PIR) under tariff item 98.01.
2. The learned lower appellate authority has held that this machine is used in an establishment which cannot be taken as a service establishment of the nature covered under the exclusion category as set out in the definition of "industrial plant" under PIR framed Under Section 157 of the Customs Act, 1962. In terms of chapter notes under chapter 98, the scope of "industrial plant" for the purpose of assessment under tariff 98.01 has been amplified to mean the one as defined under Project Import Regulation (PIR). This definition as set out under clause 3(a) of PIR is as under:
"Industrial plants" means an industrial system designed to be employed directly in the performance of any process or series of processes necessary for manufacture, production or extraction of a commodity, but does not include-
(i) establishments designed to offer services of any description such as hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops; or
(ii) a single machine or a composite machine, within the meaning assigned to it, in Notes 3 and 4 to Section XVI of the said First Schedule.
3. The grounds as set out in the grounds of appeal in the appeal memorandum are as follows:
PIR'S, 1986, define (for the first time) the "industrial plant" and specifically excludes service establishments such as photographic studios, photo copying studying, photographic film processing laboratories, etc., from the purview of the concept of the industrial plant. Such establishments involve some kind of operations of processing and yet they are not eligible for project benefit since their basic formulation is of service orientation. The examples given are illustrative and not exhaustive. It is in this context that the claim of the party that they are not service unit is not acceptable since their project is analogue to photographic film processing labs and copying studios.
The orders of Hon'ble High Court of Madras vide their order No. 5711 of 1982 are not applicable in this case since the subject issue here is not to decide whether the project of the importers is an "industrial plant" or not. The issue here is to decide whether the project of the importers is "service oriented" or not because the service oriented units like hotels, photo processing labs, etc. are specifically excluded from the concept of the project imports.
4. The learned SDR vehemently pleaded that the machine imported by the respondent is to be used for the purpose of reproduction of the sound in the respondents factory and this reproduction of the sound is akin to the equipments which are used in the photographic studios, photographic film laboratories, etc. The very nature of operation of transfer of sound is like transferring of a photographic impression from a negative to a positive as in the case of photographic studio or taking out a copy of printed material in a photocopying machine. The process carried out being similar to the use of the above in the respondents factory, the use of machinery in question should be taken to be use in a service establishment and since the equipment imported for service establishment in terms of definition of the "industrial plant" given under PIR are excluded from the purview of the assessment under tariff heading 98.01, the respondents goods will not be entitled to the said benefit. In this connection, the learned SDR was asked to refer to the process of manufacture carried out with the help of this machine for the transfer of sound as set out in the order of the learned lower authority. He pleaded that the master tape is used for the purpose of transfer of sound and this master tape is put into the machine and the sound from this is reproduced for being recorded to a tape which is wound on a pan cake and after recording of this sound in the pan cake, the same gets transferred to another pan cake which is then taken into use for putting the recorded tape of the desired length into the individual cassettes. In this connection, we asked him whether the use and the operations which are carried out in the establishment could be taken to be akin or similar to the operations carried out in the photographic studio or the photocopying studio or other establishment given by way of illustrations in the definition of the "industrial plant" as set out under regulation 3(a) of PIR. He urged that the use could be similar and the respondents unit can be considered as a service establishment.
5. The learned Consultant has referred us to the order of the learned lower authority and he has taken us through the details as set out in the said order about the method of sound recording and also the reasoning of the learned lower authority in this regard. He has urged that he is adopting the reasonings of the learned lower authority and drew our attention to the decision of the Hon'ble Madras High Court in the case of Stiper Recording Co. Pvt. Ltd. v. Government of India wherein he has urged the Hon'ble High Court has held that unit manufactures pre-recorded cassettes by sound duplication on tape to tape is not a service industry but an 'industrial plant' within the meaning of Clause 3(a) of PIR, 1986 and that the goods are assessable under tariff 98.01. High Court relied on an earlier judgment of the same Court before the amendment of the definition of the term 'industrial plant' wherein it was held that the goods in question would be eligible to the benefit of assessment under tariff 98.01.
6. We have considered the pleas made by both the sides. In order to deny the respondents the benefit of assessment under tariff 98.01, the revenue has to show that the respondent's establishment falls in the category of service establishments which are excluded from the scope of definition of 'industrial plant' as set out in regulation 3(a) of PIR. The establishments which have been noted down there by name by way of illustration are hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops. We observe establishments as noted are such where an individual goes for getting a particular service from that establishment i.e., in the hotels by way of place of residence or to the hospital for treatment or for testing in the labs, etc. for various purposes, photographic studios where a person goes to have his photographs, etc. The individual therefore gets a service for which a particular establishment is set up and which establishment answers to the need of an individual which is of a specific nature. There is a nexus between the industrial and the establishment with reference to the service that can be obtained from that establishment. In this background, we have to examine whether the respondents establishment can be in any way considered to be like the ones which have been given as illustration in the regulation 3(a) of the PIR. In the respondents place the tapes which are manufactured are out of a master tape and the machine in question transfers the sound from the tape on to a pan cake and which pan cake ultimately after the sound is recorded on the tape is utilised and placed in the desired length in the deck of the cassette for being used. It is not the case here that an individual can take a blank cassette to the respondent and get a particular sound track recorded from another tape. If that were so, the establishment could be taken to be answering to the nature of the establishments as have been given as illustrations for being excluded from the purview of the terms "industrial plant' in terms of regulation 3(a) of PIR. There is no plea from the revenue that this is the nature of service rendered in the respondents establishment. If that be not the case and the respondents establishment cannot be taken to be akin to or similar to the ones which have been given as illustration in regulation 3(a), the machinery which is installed in the respondents factory cannot be taken to be excluded from the purview of the term 'industrial plant'. As it is, the machine imported is a part of an integrated arrangement for the purpose of manufacture of the recorded cassette tapes.
7. The learned Consultant has taken a plea that the blank tapes and recorded tapes as it is for excise purpose are treated as two different commodities and recording of the tape is treated as a process of manufacture.
8. We observe that we are not called upon to go into this aspect, inasmuch as for the purpose of consideration whether the respondents machine is entitled to the benefit of assessment under tariff 98.01 what is to be examined is whether the respondents establishment can be treated as a service establishment. We have already negatived the plea of the revenue in this regard as above and we hold that the learned lower authority's order is sustainable in law and the appeal filed by the revenue is dismissed.
(Pronounced and dictated in Open Court).