Calcutta High Court
Indian Oxygen And Anr. vs Union Of India (Uoi) And Ors. on 13 March, 1992
Equivalent citations: 96CWN761, 1992(40)ECC1
JUDGMENT Ajoy Nath Ray, J.
1. This is a writ application where the applicant Indian Oxygen Ltd., claims to be outside the purview of the Research and Development Cess Act, 1986 in regard to certain purchase of machinery from three foreign countries and in regard to importation of specialized service for supervising, advising and guiding in the matter of erection, commissioning and performance tests of those machines.
2. The preamble, Sub-section 2(h) and Section 3 of the aforesaid Act being Act 32 of 1986 are set out below:-
"An Act to provide for the levy and collection of a cess on all payments made for the import of technology for the purposes of encouraging the commercial application of indigenously developed technology and for adapting imported technology to wider domestic application and for matters connected therewith or incidental thereto.
2(h) "technology" means any special or technical knowledge or any special service required for any purpose whatsoever by an industrial concern under any foreign collaboration, an includes designs, drawings, publications and technical personnel.
3(l). There shall be levied and collected, for the purpose of this Act, a cess at such rate not exceeding five per cent. on all payments made towards the import technology, as the Central Government, may, from time to time, specify by notification in the Official Gazette.
2) The cess shall be payable to the Central Government by an industrial concern which imports technology on or before making any payments towards such import and shall be paid by the industrial concern to any specified agency."
3. No Affidavit-in-opposition has been filed in this matter. Accordingly, the statements contained in paragraphs 6 and 7 of the Writ Petition are to be taken as substantially correct regarding the transaction under review. The said two paragraphs are set out below:-
"6. Pursuant to and in terms of the aforesaid import licences, your petitioners imported the permissible machinery and components from inter alia, Motherwell Bridge Constructors Ltd. U.K. and Cryostar, Switzerland and Mannesman Demag, West Germany.
7. In order to obtain valid performance guarantees of the said machinery and components from these foreign sellers, it was essential that the services of specialist Engineers deputed by the foreign sellers should be available for rendering necessary supervision, advice and guidance during the erection, commissioning and performance tests of the machinery and components sold by the foreign sellers."
4. Mr. Ranjan Deb appearing for the petitioners has submitted that under the said Act not every importation of special service is covered. He said that upon a plain reading of the definition of the word "technology" it is quite clear that for the Act to be applicable the importation of technology knowledge or special service must have been made under any foreign collaboration.
5. Mr. N.C. Roychowdhury appearing for the respondents has also not been able to dispute that the Act would apply only with regard to importations of technology under a foreign collaboration. However, Mr. Roychowdhury has submitted that the phrase "foreign collaboration" is not defined in the Act and as such the phrase should be given a wide meaning, as otherwise the Act would have an extremely restricted application.
6. Mr. Roychowdhury has submitted that there are very many imports of technology knowledge or special service in relation to several small foreign importations, and if foreign collaboration is so defined as not to cover these importations, a good amount of intended Government revenue, sought to be collected under the 1986 Act would escape collection. Mr. Roychowdhury has also said that the collections under the Act would form a development fund and that it would ultimately enure to the benefit of the country's technological progress.
7. Mr. Deb on the other hand submitted that foreign collaboration must mean some agreement or arrangement, where the phrase foreign collaboration, can have some similarity of meaning akin to the common understanding of the phrase in the commercial and trade circles. Mr. Deb has submitted that the instant transaction cannot, in any normal view of the matter, be termed as involving a foreign collaboration.
8. To my mind, the definition of technology clearly demonstrates that the foreign collaboration itself must be distinct from the knowledge imported or the special service imported. The definition clarifies that the importation of knowledge or service is under the foreign collaboration, and as such, the foreign collaboration itself would be distinct from, and wider than, the isolated instances of importation of knowledge or service. It is conceivable that there might be a foreign collaboration which involves only importation of technical knowledge or special service and that such importations are made from time to time, or from place to place upon a span sufficiently wides so as to cover the meaning of the phrase 'foreign collaboration'. In the instant case, however, there is no such width or importation and it is only in regard to purchase of certain machinery that supervising personnel were sought to be brought from the foreign sellers.
9. An agreement for sale cannot be a foreign collaboration within the meaning of Section 2(h) of the said Act. A seller does not work along with or together with the purchaser. There is no element of partnership or joint venture involved in a contract for sale, which has always been clearly distinguished from a contract in the nature of a partnership or a joint venture. The contract for purchase of the machinery from the selling concerns in the United Kingdom, Switzerland and West Germany cannot in any view of the matter be termed as a foreign collaboration, or three foreign collaborations with Indian Oxygen Ltd.
10. Under these circumstances, the importation of supervisory personnel made pursuant to the contracts for purchase of machinery cannot be said to be importation of technology under any foreign collaboration within the meaning of Section 2(h) of the Act quoted above. The element of joint venture to any appreciable or tangible degree is completely absent. Even when the supervisors came, they were not to collaborate with any other group or personnel in India, but that they were themselves be under an obligation effectively to supervise, advise and guide during the erection, commissioning and performance of the machines.
11. In the above view of the matter, in my opinion, it is quite clear that the transactions mentioned in the writ petition are not within the ambit of the aforesaid Act.
12. A letter dated 21-10-88 written by the Manager, Technology Department, of the Industrial Development of Bank of India, on the face of itself, appears to go so far as to assert that the Act would be applicable even without the importation being made under any collaboration agreement.
13. Rule 3 of the Research and Development Cess Rules of 1987 was relied upon by the Manager in his views expressed in the said letter. The said Rule is quoted below:
"3. Levy Cess : For the purpose of levy of cess under Section 3 of the Act, 'Payment' shall include (a) payment made towards import of technology as approved by the Central Government in terms of any foreign collaboration agreement;
(b) payment made towards the cost of drawings and designs as approved by the Central Government;
(c) payments made to foreign collaborations or to any other person for on in connection with deputation of technical personnel to India in accordance with the approval granted by the Central Government or the Reserve Bank of India;
(d) any other payment made towards the import of technology and approved by the Central Government."
14. It is beyond dispute that no rule can transgress the four corners of the Act. After the Act defines technology as something which can only be as under a foreign collaboration, thereafter a rule seeking to remove such necessity of the existence of a foreign collaboration, is ultra vires the Act and void to that extent.
15. Rule 3 Sub-rule (c) of the Cess Rules quoted above, should not, to my mind be so interpreted as to include situations where payments are made to parties in respect of technologies which have not been imported under a foreign collaboration. Such an interpretation is to be avoided. In this view of this matter the letter dated 21-10-88 mentioned above is declared to contain an error of law on the face of it and is accordingly not to be acted upon by any party and shall not be binding upon the writ petitioners.
16. There shall be a writ of or in the nature of Prohibition restraining the respondents and each of them and their servants, officers and employees from in any manner seeking to make the said Act or the said Rules applicable to the transactions mentioned in this writ petition. There shall also be a declaration in terms of prayer(b) of the writ petition. In view of the aforesaid findings, it is not necessary to enter into the question of the Act itself, or the Rules framed thereunder themselves being unconstitutional.
17. There will be no order as to costs.