Madras High Court
Collector Of Customs vs Orient Litho Press Ltd. on 14 November, 2000
Equivalent citations: 2001(129)ELT306(MAD), (2001)1MLJ131
Author: V.S. Sirpurkar
Bench: V.S. Sirpurkar, M. Chockalingam
JUDGMENT V.S. Sirpurkar, J.
1. This judgment shall dispose of two writ appeals they being W.A. Nos. 229 and 291 of 1994. W.A. No. 229 of 1994 is by the Collector of Customs, Madras and two others, while, W.A. No. 291 of 1994 is at the instance of the original writ-petitioner. We would, therefore, refer to the parties by their status in the writ petition.
2. Petitioner had challenged the orders dated 23-12-1985 passed by the Assistant Collector of Customs as also the other order dated 9-1-1986, passed by the Collector of Customs. By these orders, the authorities had held that the petitioner was not entitled for the registration of the project contract in respect of Graphic Art Films. Some facts would be necessary to understand the real nature of controversy.
3. Petitioner sought for the registration of the project contracts in respect of import of as many as five items. They being:
(i) Rolland four colour offset printing machine,
(ii) Pre-press register system for the above,
(iii) High speed letter press rotary ticket printing machine,
(iv) Colour scanner, and
(v) Graphic Art Films in various sizes.
This was being done under the provisions of Project Imports (Registration of Contract) Regulations, 1965 (unamended) and more particularly under Regulation No. 3 thereof. It was the claim of the petitioners that they were importing the aforementioned machinery and were entitled to the registration of the contract and, as a result, were also entitled to the lesser duty as covered by Entry 84.66. Both the authorities did not accept this claim of the petitioners and, therefore, the petitioners approached this Court by way of a writ petition.
4. It is an accepted position that if the contract is registered then, the petitioners get the benefit of the lesser duty on the aforementioned machinery under Tariff Entry No. 84.66. The learned single Judge has, however, held that the petitioners were entitled to the registration of contract even in respect of the fifth item, i.e. Graphic Art Films as the Graphic Art Films were necessary for the setting up of an unit, i.e. for the testing of the machinery which has been imported. The learned Judge found that this item of Graphic Art Films could be covered more particularly in 84.66(i). The learned Judge also found that the quantity of the Graphic Art Films, which were being sought to be imported and for which the prayer was for the registration of the contract, was relatively low and could be only viewed as being made for the purpose of testing the machinery alone. The learned Judge found that the said films were valued at Rs. 1,02,612.40 and, as such, it was a small quantity. The learned single Judge, therefore, allowed the writ petition holding that the petitioners were entitled to the registration of the contract in respect of even the fifth item, viz. Graphic Art Films.
5. Aggrieved by this judgment, the Collector of Customs, Madras has filed the appeal, so also the writ-petitioner. The contention of the writ petitioner is that the learned single Judge has erred in restricting the relief only to the present consignment whereas, the relief should have been to the extent of 10% of the total value as per Entry No. 84.66(ii).
6. The learned senior counsel, Mr. V.T. Gopalan, Additional Solicitor General, appearing on behalf of the Collector of Customs, Madras firstly pointed out before us that the learned single Judge has erred in allowing the writ petition inasmuch as the learned Judge has held that the item of Graphic Art Films would fall under Entry 84.66(i) and not under 84.66(ii). Learned senior counsel points out that it is the specific case of the writ-petitioner that their claim was not under Entry 84.66(i) but, it was under Entry 84.66(ii). Learned senior counsel draws our attention to the appeal memo, which the petitioner has filed before the Collector (Appeals), Customs House, Madras. He relies on paragraph 4, which is as under :
"Our claim is not under 84.66(i) for the reason that this raw material is not for the manufacture of capital goods falling under that Heading. This provision is intended for manufacturers/fabricators of machinery and that is not our line of activity. This is a raw material essential for the maintenance of the plant or project and is not for the end product. In this context, we submit that there is not well-set definition for raw material either in Customs Tariff or in the I.T.C. Policy. Hence it is relevant to go into the dictionary meaning.
"Raw material" means that out of which any process of manufacture makes the articles it produces. Thus there cannot be any raw material for maintenance initial filing up or for that reason some startup chemicals. It is too far fetched to think that the framers of this Tariff would have this in mind. Hence there is an inherent defect in the very structure of the Heading 84.66(ii). Thus our claim for the benefit of project import on principles of natural justice is maintainable under law".
The learned Additional Solicitor General points out that in the wake of this stand by the petitioner, the learned single Judge could not have reverted back to Entry No. 84.66 (i) and could not have held that the item of Graphic Art Films was necessary for setting up of an unit, which was not even the case of the petitioner. As a second contention in support of the appeal, the learned Additional Solicitor General points out that the finding given by the learned single Judge is basically incorrect because the language of Entry No. 84.66(i)(d) has a necessary reference to the items covered by Clauses (a), (b) and (c) and it could never be said that the Graphic Art Films could be one such item. The learned Additional Solicitor General further contended that the reliance by the learned single Judge on the report of the Director General Technical Development was also totally uncalled for as the said report had no statutory value.
7. As against this, the learned counsel, Mr. Krishna Srinivasan, appearing on behalf of the petitioner contended that it has always been the case of the petitioner that the said Graphic Art Films fell under Entry No. 84.66 (ii) and not under 84.66(i). The learned counsel contended that after all the Graphic Art Films were essential for the project mentioned in sub-heading (i), i.e. the project for which the imports were being made. The learned counsel further pointed out that it could never be disputed that unless the films were imported, there would be no question of running the machinery which was imported and as such, the import was bound to be permitted. He also pointed out that Entry No. 84.66(ii) should be liberally read and should not be restricted to the concept of "maintenance of the plant or project" but should be read as "the Goods essential for the project".
8. On these conflicting contentions, it has to be decided whether the learned single Judge was right in granting the relief as he did and whether he was right in restricting the relief only to the present consignment and not to the extent of 10% as covered by Entry No. 84.66(ii).
9. In the first place, it has to be observed that right from the beginning, the case of the petitioner was that the relief was being claimed under Entry No. 84.66(ii) and not under Entry No. 84.66(i). It will be, therefore, better to quote these entries.
"84.66(i) All items of:
(a) Machinery including prime movers,
(b) Instruments, apparatus and appliances,
(c) Control gear and transmission equipment,
(d) Auxiliary equipment, as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified : (1) industrial plant, (2) irrigation project, (3) power project, (4) mining project, (5) project for the exploration for oil or other mineral, and (6) such other projects as the Central Government may having regard to the economic development of the country notify in the Official Gazette in this behalf:
Provided these are imported (wherein one or in more than one consignment) against one or more specific contracts which have been registered with the appropriate Customs House in the manner prescribed by Regulations which the Central Board of Excise and Customs may make under Section 157 of the Customs Act, 1962 (52 of 1962) and such contract or contracts has or have been so registered before any order is made by the proper officer of Customs permitting the clearance for home consumption, or deposit in a warehouse of items, components or raw materials;
(ii) All spare parts, other raw materials (including semi-finished material) or consumable stores imported, as a part of a contract or contracts, registered in terms of sub-heading(i) provided the total value of such spare parts, raw materials, and consumable stores does not exceed 10% of the value of the goods covered by sub-heading(i) and further provided that such spare parts, raw materials or consumable stores are essential for the maintenance of the plant or project mentioned in sub-heading(i)."
10. A plain reading of Entry No. 84.66(i) and more particularly the language employed in Clause (d) would highlight a position that the auxiliary equipment, components or raw materials have a specific reference to the "aforementioned items". These "aforesaid items" have necessarily to be read with reference to Clauses (a), (b) and (c). There could be no dispute that the Graphic Art Films, with which we are concerned, cannot be covered under Clause (a), (b) or (c) of sub-heading (i) of Entry No. 84.66. Once we hold that there is a clear reference to Clauses (a), (b) and (c), there is no question of falling on the terminology "for the initial setting up of a unit or the substantial expansion of an existing unit". The logic in the impugned Judgment is that for initial setting up of an unit, the testing would be necessary and unless the films in small quantity were imported or allowed to be imported the setting up could not be completed. Indeed, this was the argument before the learned single Judge advanced on behalf of the petitioner. However, even at the cost of repetition, we may say that that is not the case of the petitioner and the petitioner always wants to fall back on the sub-heading (ii) of Entry No. 84.66 and not on the sub-heading (i). Once that is clear, it would be sufficient to mention that the recourse could not be had to the words of the first part of the entry nor could any support be drawn from the words "initial setting up of a unit". Since the judgment turns only on the basis of the language of Entry No. 84.66(i), the finding will have necessarily to go.
11. The learned Additional Solicitor General also drew our attention to some observations in the judgment in paragraph 3 where the learned single Judge has specifically held as follows :
"The short question is whether the 'initial' setting up of the unit would also mean the test working of the machinery. Coming to tariff heading 84.66(ii) relevant portion is as follows:
..............."
After quoting the sub-heading (ii) of Entry No. 84.66, the learned Judge proceeds to hold:
"Graphic art films cannot be deemed to be essential for the maintenance of the plan or project. In this case, we have to keep in mind the fact that four items of machinery had been permitted to be imported under the scheme. The question whether for the maintenance of those machineries graphic art film is necessary. I have no hesitation in holding that graphic art films of various sizes are not necessary for the maintenance of the machineries imported under 84.66(i). In other words, test working of the machinery can by no stretch of imagination be equated to maintenance of the machinery".
According to the learned Additional Solicitor General this is a complete answer to the appeal by the writ-petitioner who wants to fall back upon sub-heading (ii) of Entry No. 84.66 but, we shall come to that question later on.
12. Our attention was also drawn to the observations in paragraph 4 where the learned Judge proceeds to observe as under:
"But there is some substance in the argument that initial setting up of the unit may require some graphic art films to test work the machinery. After all, the petitioner has not sought to import a large quantity of graphic art films. The quantity sought to be imported seems to suggest that it was mainly intended to test work the machinery after erection work. This is precisely the reason why they have imported graphic art films of all sizes so that the machinery can be test worked with all sizes of graphic art films."
The learned Additional Solicitor General was at pains to point out that there was absolutely no basis for these observations. We tend to agree. In fact, there was no material on record to suggest that the quantity of the films was insignificant or was only for the purposes of testing the machinery. In fact, there is no material on record to suggest as to what would be "a large quantity" and "a small quantity". In our opinion, these observations would have no basis. As we have already observed that even if the quantity is relatively small, it has absolutely no relevance in so far as the sub-heading(i) is concerned for the simple reason that the words "initial setting up of a Unit" do not have any connection with the items like graphic art films which have been sought to be imported. Clause (d) has essentially to be read along with Clauses (a), (b) and (c), which have got nothing to do with the fifth item in question, viz. Graphic Art Films.
13. This should normally be the end of the matter. However, the learned counsel appearing on behalf of the writ-petitioner very strongly contends that the language of Entry 84.66(ii) totally covers the present item. In our opinion, the language of Entry No. 84.66(ii) does not cover the case. We are in total agreement with the learned single Judge when he says that the graphic art films are not meant for the maintenance of the plant or project mentioned in sub-heading (i). The learned counsel wants us to read the entry so as to avoid the aspect of "maintenance". His contention is that the Graphic Art Films would be essential for the project and if they are so essential for the project then, they would be permissible to be imported with the aid of that entry. According to us, the language does not suggest so and we cannot read the entire entry in such a sketchy manner or completely ignoring some words in the entry. The last portion of the entry is as under :
"and further provided that such spare parts raw materials or consumable stores are essential for the maintenance of the plant or project mentioned in sub-heading (i)."
This proviso clearly conveys that the goods to be imported must be essentially for the maintenance of "the plant or project". The word "or" in between the words "plant" and "project" would make all the difference. If one accepts the interpretation of Mr. Krishna Srinivasan, learned counsel for the petitioner then, we will have to omit reading the words "for the maintenance of". It is an accepted canon of interpretation that the specific words cannot be omitted while interpreting a particular provision. For these reasons, we do not accept the contention raised by the learned counsel appearing on behalf of the petitioner.
14. The learned counsel further said that the application was made with the recommendation of the Director General - Technical Development. He points out that the Director General - Technical Development was essentially an authority who could not be said to be a busybody when he is functionally connected with the subject which is being considered. We have absolutely no quarrel with his contention that the Director General - Technical Development cannot be said to be a busybody or an outsider but, the fact cannot be forgotten that the opinion/recommendation of the Director General - Technical Development does not have any statutory force. The language of Regulation No. 3(2) does not anywhere bring in the concurrence of the Director General of Technical Development and his concurrence is necessary only where the imports are made by the Central Government, any State Government, Statutory Corporation, Public Body or Government Undertaking run as a Joint Stock Company. In that view, even if the petitioner had obtained the clearance by the Director General of Technical Development, it would be of no consequence and would not be binding on the authorities under the Customs Act. Be that as it may, in our opinion, even if that recommendation is made, it does not have any persuasive force as has been put by the learned counsel for the petitioner. We are of the clear opinion that the recommendation is incorrect in law.
15. For the reasons stated above, we are of the opinion that the impugned judgment cannot be confirmed. It has to be set aside. In the result, W.A. No. 229 of 1994 is allowed while W.A. No. 291 of 1994 is dismissed. No costs. C.M.P. No. 1971 of 94 is closed.