Customs, Excise and Gold Tribunal - Delhi
Lohia Machines Ltd. vs Collector Of Customs on 21 March, 1986
Equivalent citations: 1986(8)ECC14, 1986(8)ECR182(TRI.-DELHI), 1986(25)ELT225(TRI-DEL)
ORDER M. Gouri Sankara Murthy, Member (J)
1. A question of construction and applicability of Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975, arises in this appeal against the order of the Collector (Appeals), Calcutta, confirming the refusal of the Assistant Collector, Customs, to register certain contracts for the purchase of spares, in terms of the aforesaid Heading.
2. The allegations in the appeal, in a brief compass, are -
(a) pursuant to the conclusion of contract(s) for the supply of capital goods and machinery for the initial setting up of a plant for the manufacture of fuel efficient two-wheelers, the appellant applied in October, 1983 and obtained registration [of the contract)] reguisite in terms of the proviso in the aforesaid Heading. After import, the goods were cleared on diverse dates from 18-11-83 onwards on payment of the concessional duty assessable in terms of the Heading;
(b) at the time of registration, no contracts for the suply of essential spare parts were concluded since the requirements thereof were not worked out. Nevertheless, in the appellant's letter to the Assistant Collector dated 12-10-1983, it was stated that the spare parts for the plant "will be imported in a month or two time for which we will be filing papers separately for project benefit." After contracts for the supply of spares were concluded and the clearance from DGTD obtained on 19-4-1984, the appellant applied for registration on 4-5-1984;
(c) in the application for registration, it was specifically stated that the spare parts being imported were essential and initial spare parts for the capital goods since imported and cleared in terms of the aforesaid Heading;
(d) The request- for registration of the contracts for spares was, however, refused by the assistant Collector on 7-6-1984 on the ground that the contracts for spares were separate contracts exclusively and cannot be correlated with the main contract for plant and machinery for which the concessional benefit was originally extended;
(e) an appeal before Collector (Appeals) resulted in confirmation of the aforesaid order of refusal to register. It was held that, since the contracts for spares did not form part of the original contracts for the supply of plant and machinery they were disentitled to registration for securing the benefit of the concessional rate of duty, in terms of the aforesaid Heading;
(f) the instant appeal before the Tribunal was the sequel.
3. It was urged, inter alia, in the Memorandum of Appeal and in the oral submissions before us that -
(a) the contracts for the supply of spares did, indeed, contain reference to the earlier contracts for supply of plant and machinery. The sellers were identical and the DGTD Certificate recommending the spares clearly indicated the particulars of plant and machinery for which the spares were intended. It could be easily verified that the value of the spares was well within the 10% ceiling as specified in the aforesaid Heading and there was thus no difficulty whatsoever in the correlation of the contracts for spares with those for plant and machinery;
(b) the Collector (Appeals) would appear to have overlooked the appellants' letter dated 12-10-83 in coming to the conclusion that the contracts for spares were not integral parts of the original contracts for the supply of plant and machinery;
(c) in any view, the Collector (Appeals) would appear to be in error in "not granting to the appellant the benefit of concessional rate of duty in respect of the import of spare parts in pursuance of the contract for import of capital goods for which the concessional duty has been duly granted to the appellants by the Assistant Collector himself" [Ground set forth in the appellants' letter dated 30-11-1985 addressed to the Bench of this Tribunal without any application for amendment of the original grounds of Appeal];
(d) in terms of the relevant Heading, registration of contracts is merely procedural and the importer is not to be denied the benefit of the concessional rate of duty made applicable in terms thereof merely for want of registration or a belated application for registration. Rules of procedure are to subserve the purposes of the Act rather than to defeat justice, and accordingly, they should be so construed as to advance the case of the assessee. If a statute vests a power in an authority, administrative or quasi-judicial, that power must be exercised in good faith and in furtherance of the object of the statute. [Reliance on the decisions reported in (i) 1968 S.T.C. 154 at 182 (Lakshmiratan Engineering Works Ltd. v. Assistant Commissioner - Judl. -Sales Tax); (ii) 107 ITR 195 (S.C.) Textile Machinery Corporation v. C.I.T.; (iii) 131 ITR 592 at 596 CIT, West Bengal v. Somendra Kumar Neogi; (iv) 126 ITR 673 at 678 (CIT v. Gedore Tools India Ltd.); (v) 128 ITR 290 (Kamal Chand v. I.T.O.); (vi) 113 ITR 208 at 216 (C.I.T. v. Satellite Engineering Ltd.); (vii) 1982(11) ITD 39 at 44 (Laxmi Rice Mills v. I.T.O.); (viii) 1982 (2) ITD 454 at 457 at 457-458; (ix) 78 ITR 26];
(e) the requirement of registration in terms of Heading 84.66(2) is, like the registration of a partnership under the Income-tax Act, 1961, merely directory and not mandatory [Reliance upon (i) 102 ITR 560; (ii) 118 ITR 392 at 395 and 396 (Additional C.I.T. v. Murlidhar Mathura Prasad);
(f) where the provisions are couched in a language which is not free from ambiguity and admits of two interpretations, a view which is favourable to the subject should be adopted [Reliance on - (i) 105 ITR 179 (C.I.T. v. Madho B. Jatia); (ii) 122 ITR 283 at 287 (C.I.T. v. Simpson & Co.); (iii) 89 ITR 236 at 240 (C.I.T. v. Naga Hills Tea Co. Ltd.); (iv) 89 ITR 251 (Controller of Estate Duty v. R. Kanaksabai);
(g) in the facts and circumstances of the case, it was impossible to have applied for registration of the contract(s) for spares, since they were not concluded by then and the law cannot be so construed as to require a mandatory performance of what was impossible.
4. Shri Gopinath, for the Respondent, drew our attention to -
(a) the absence of any mention whatsoever of any supply of spares in the contracts for the supply of plant and machinery either originally or by way of an amendment as provided for in the Project Imports (Registration of Contracts) Regulations, 1965, so as to comply with the requirements of Heading 84.66(ii);
(b) a decision of this Tribunal in Order No. 166/85-B2 Appeal No. 587/78-B2 (M/s. Ballarpur Industries Ltd. v. Collector of Customs, Bombay.
5. On a perusal of the papers and the submissions made it would appear to us that -
(a) the appellant could not have, in the guise of formulation of the question that arises for consideration in the appeal, introduce a new ground not adverted to the Memorandum of grounds of appeal originally. Nor can such a thing be done in the course of a letter addressed to the Bench of this Tribunal. An additional ground, if felt necessary, can only be urged when an appropriate application for amendment of the grounds of appeal is moved after notice to the other side and the application heard and allowed. Not by means of a letter addressed to the Tribunal, even though it may be that a copy thereof had been served on the other side. There has been no actual hearing of any prayer of amendment and even a cursory perusal of the grounds of appeal originally filed would reveal that the grounds formulated therein do not, even by implication, take within their ambit the question suggested for consideration in the aforesaid letter;
(b) even so, assuming that such a question arises, it does not, necessarily follow from the registration of certain contracts for plant and machinery that separate contracts for supply of spares for such plant and machinery are also to be registered, regardless of the actual requirements of the statute itself;
(c) Heading No. 84.66 provides, inter alia, for a concessional levy at 40% ad velorem on all imports of plant and machinery required for the initial setting up of a unit or the substantial expansion of an existing unit as well as spares and raw materials, as the case may be, essential to the maintenance of the plant and machinery to the extent of 10% of the value of the plant and machinery itself provided that -
i) one or more specific contracts under which the plant and machinery had been purchased are registerd with the appropriate Custom House in the manner prescribed by the Project Imports (Registration of Contracts) Regulations, 1965 framed under S. 157 of the Customs Act, 1962 (hereinafter, the Regulations) and before any order permitting clearance for home consumption or warehousing, as the case may be, is made; and
ii) the spares or raw materials should be imported as a part of a contract or contracts registered as aforesaid.
(d) regulation 5 of the Regulations, provides for an application to be made for registration of any amendments made to the contract sought to be registered, whether the amendments are made before or after registration;
(e) registration of the contracts as originally concluded or as amended subseguently, as prescribed in the Regulations, prior to any order made for clearance, would thus appear to be one of the conditions to be fulfilled to claim the benefit of the assessment under the aforesaid Heading;
(f) the questions that arise are -
(i) if there is any doubt or ambiguity in the requirement and does the provision admit of two interpretations so that the one favourable to the appellant may be adopted;
(ii) if such registration is merely procedural and directory and not mandatory either expressly in terms of the aforesaid Heading or by necessary implication, so that failure to apply for registration in the manner required would disentitle the appellant from the benefit of an assessment under that Heading; and
(iii) if, in the facts and circumstances of the case, the requirement of registration of the contract(s) for spares as a part of the contract(s) for plant and machinery was impossible and cannot, therefore, be insisted upon;
(g) even a cursory look at the Heading leaves no manner of doubt, whatsoever, in regard to the requirement of registration of contract(s), not merely for the purchase of the plant and machinery but the spares as well as part and parcel of such contract(s) prior to any order that may be made permitting clearance. The spares or other raw materials should be "imported as part of a contract or contracts registered in terms of "the first subheading to come within the ambit of the second limb or subheading of Heading No. 84.66. Obviously, if the import was not pursuant to the purchase under the contract(s) already registered, it is disentitled to assessment under sub-heading (ii) of Heading No.84.66. Nor could the Learned representative of the appellant discover to us any ambiguity or even scope for doubt or ambiguity in the aforesaid provision. It is only if the provision is ambiguous and susceptible to more than one reasonable interpretation that the question of adoption of that which is favourable to the asses-see arises. Not otherwise. In the premises, the decisions cited in para 3(f) supra are all inapposite and inapplicable. Where the language is clear and the meaning plain, effect must be given to it [(i) AIR 1955 S.C. 504 - Thakur Amarsinghji v. State of Rajasthan; (ii) AIR 1959 S.C. 135 - Sales Tax Officer. Benara;;. v. Kanhaiyalal Mukundlal Saraf];
(h) (i) it is axiomatic in the construction of the charging provisions in fiscal enactments that one must have regard to the letter of the law and not merely the spirit, of the statute or the substance of the law [AIR 1957 S.C. 657 (A.V. Fernandez v. State of Kerala); AIR 1957 S.C. 664 (C.L.T., Bombay v. Provident Investment Co.]. Tax laws are not beneficent legislation so that a liberal construction could be adopted. In the words of Rowlatt J. in Cape Brandy Syndicate V. I.R.C. [(1921) 2 KB 403] "in a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." It is equally well settled that while a charging provision has to be strictly construed so that "the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him" [Russel v. Scott (1948) 2 All ER1 (H.L.) (Lord Simonds)], a perpson who claims an exemption or lesser tax or duty has to establish it [AIR 1959 S.C. 239 - C.I.T. v. Ramakrishna Deo]. An exemption has to be construed strictly [AIR 1967 S.C. 1201 Municipal Committee, Akot v. Manilal]. Again, while the Rule of strict construction applies primarily to charging provisions in a taxing statute, it has no application to a provision not creating a charge but laying down machinery for its calculation or procedure for its collection and such machinery provisions "are not generally subject to a rigorous construction. The Courts are expected to construe the machinery Sections in such manner that the charges to tax is not defeated." [AIR 1981 S.C. 1887 at p.1904 - Associated Cement Co. Ltd. v. C.T.O.; also AIR 1980 S.C. 485 - C.I.T. v. National Taj Traders];
(ii) admittedly, Heading 84.66 (ii) is the charging provision itself in a fiscal statute and the rate of duty specified for goods thereunder is concessional. The provision has, therefore, to be strictly construed and the onus to establish its applicability rests, heavily, on the appellant. As already observed, there is no ambiguity or lacuna, whatsoever, about the provision itself or when read with the aforesaid Regulations so that on an appropriate construction the benefit thereof could be afforded to the appellant;
(iii) nor can it be said that the appellant had complied with the conditions requisite for its applicability. The applicant had not, admittedly, applied for registration of the supply and import of the spares as part and parcel of the contract(s) for the supply of the plant and machinery, either originally or by way of amendments thereof. Nor was the application for registration of the contract(s) for spares made prior to any order in connection with the clearance of the goods (the plant and machinery). It is altogether an independent application that is preferred for registration of the contract(s) for spares - unconnected with the contract(s) for plant and machinery although, it may be that the sellers are identical and the contract(s) for spares can be correlated with the earlier contract(s) for plant and machinery. Indeed, it is not the contention of the Appellant that there has been compliance with the requirements of either the aforesaid Heading or the Regulations but that compliance with at least the aforesaid requirements for registration should not be insisted upon, since registration itself is merely procedural, directory and not mandatory and, in any event, the requirements are such that they are impossible of compliance and, accordingly, registration should never have been refused even if the requirements for such registration had not been complied with;
(iv) the concessional duty in terms of the sub-heading (ii) (of Heading 84.66) is applicable when the requisite conditions laid down therein are fulfilled. The relevant condition is not that the contract(s) for spares should be registered but that the supply and import thereof must be pursuant to and form part of contract(s) for plant and machinery "registered in terms of sub-heading (i)." Registration is only in terms of sub-heading (i) and that too in respect of contract(s) for supply of plant and machinery sought to be imported. There can be no registration under sub-heading (ii) of 84.66. One cannot insist upon registration of contract(s) for spares under sub-heading (i);
(v) while registration under sub-heading (i) may be procedural, the conditions pre-requisite for an entitlement to registration of contract(s) for plant and machinery, for a concessional assessment of an import of spares once the contract(s) for plant and machinery had been registered, are not procedural. The concessional charge of duty is attracted only if the requisite conditions had been fulfilled and not otherwise. There is nothing procedural - not even registration aliunde -for an entitlement to an assessment under sub-heading (ii) of the Heading. The fulfilment of the condition pre-requisite is not procedural. Such condition having been laid down in the charging provision itself [namely, sub-heading (ii) to Heading 84.66] it has necessarily to be complied with, on pain of disentitlement to an assessment thereunder;
(vi) nor is it correct to say that the requirements for registration or even the registration itself of the contract(s) for supply of plant and machinery are not mandatory but merely directory. It will be observed that, the words in the Heading are absolute, explicit and peremptory. There is only one mode of effecting the object of assessment under that Heading and one train of formalities to be observed - the spares should be imported only "as a part 'of a contract or contracts, registered in terms of sub-heading (i)" of Heading 84.66 - contract(s) either as originally concluded or as may have been subsequently amended in terms of Regulation 5 of the Regulations. The requirement cannot be anything other than essential or imperative. When certain requirements are prescribed by a statute as preliminary to the acquisition of a right or benefit, conferred by the statute, such prescriptions cannot be held to be merely directory and not mandatory so that the benefit can still be claimed or obtained notwithstanding failure to comply with those requirements;
(vii) thus, an application for registration of a partnership to obtain the benefit of lower rates of assessment in Income tax was held to require strict compliance with the requirements of 5.26-A of the Income Tax Act, 1922, even in regard to signature by all the partners [AIR 1958 S.C. 315 (Steel Brothers Ltd. v. C.I.T.] - also, AIR 1967 S.C. 448 (Parekh Wadilal Jivanbhai v. C.I.T.); AIR 1973 S.C. 1445 (Sri Ramamohan Motor Service c. C.I.T.)]. It is not, therefore correct to say that the requirements of registration of a partnership firm under the Income Tax Act, had ever been construed to be merely procedural, directory and not mandatory;
(viii) in 102 ITR 560 (Patna) as well as 118 ITR 392, relied upon for the Appellant, it was not the requirements of initial registration of a partnership that were in issue but the continuance of a registration that was already effected. It is on a construction of S. 184 of the Income Tax Act in the context of the time prescribed for filing a return under S.139 (4) of the Income Tax Act, 1961, the opportunity to be afforded to the assessee to rectify defects in the declaration of the continuance of a previously registered firm for the assessment year in question in terms of S.185 (2) and in the light of subsequent repeal and re-enactment of S.184(7) so as to provide for submission of the declaration within the period prescribed for filing of the return under S.139 (1) and (2) and not, necessarily, along with the return as heretofore, that the Hon'ble High Courts of Patna and Allahabad concluded that the requirement of submission of a declaration along with the return was procedural and, accordingly, directory and not mandatory;
(ix) so also, in (1968) 21 S.T.C. 155, the question was if an appeal, otherwise in order, could be defective if the memorandum of appeal was not accompanied with proof of payment of the admitted tax in terms of S.9 of the U.P. Sales Tax Act (1948). It was on a construction of the word "entertain" (ultimately held to mean "admit to consideration") occurring in the said provision that their Lordships concluded that it was a procedural requirement and, accordingly, not mandatory. The statutory requirements for registration in the Heading No. 84.66 stand on altogether a different footing as already observed;
(x) in 107 ITR 196 (S.C.) (as well as 126 ITR 673) the question for consideration was if an existing business reconstructed is entitled to the benefits accorded to new units in terms of S.15C of the I.T. Act, '1922. It was on a consideration of the principal object of enacting that provision (to encourage setting up new industrial units) and on a construction of S.15C(2)(i) that the Hon'ble Court held that, in the facts and circumstances of that case, the manufacture of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter. The statutory requirement in the peculiar facts and circumstances of that case was held to be fulfilled. That is not to say that if the statute had prescribed certain requirements for entitlement of benefit thereunder, the benefit is to be accorded notwithstanding that the requirements were not fulfilled, just because it is a new unit. Similarly, the question for consideration in 113 ITR 208 was if the assessee was entitled to the benefit of a tax holiday provided for in S.84 (now 80J) of the I.T.Act, if he fulfilled the requisite conditions, not in the first year after commencement of production, but in the subsequent years. The question was not if such benefit was to be accorded if he never complied with the requisite conditions at all as in this case.
(xi) in 124 ITR 290 and 131 ITR 592, the Courts were concerned with procedural requirements - not with the fulfilment of such requisites as would enable a claim for concessional assessment, as in this case. For, as already observed, while registration simpliciter may, at least, be procedural, the conditions pre-requisite for an entitlement to registration is not procedural but mandatory;
(xii) none of the decisions relied upon for the appellant, in the premises, does really apply to the facts of the instant appeal. We have, necessarily to hold that the requisite conditions for entitlement to registration of contract(s) for plant and machinery and the consequential concessional assessment of imports of not merely such plant and machinery but spares as well pursuant to such contracts already registered are not to be confused with a procedural requirements but are mandatory;
(i) the contention to the effect that in the facts and circumstances of this appeal the registration of the contract(s) for spares as a part of the contracts) for plant and machinery was impossible was one to despair. Regulation 5 of the Regulations, as already observed, enables amendments to the contract(s) already registered. If the appellant entered into contract(s) for supply of spares by way of amendment of the contracts already registered, there would have been no difficulty. The fresh contracts for supply of spares were all admittedly concluded by 24.2.1983 while the earliest clearance of plant and machinery took place only 18.11.83. Prior to 18.11.83, nothing prevented the appellant to apply under Regulation 5, if, indeed, the spares were' ordered by way of amendments to the original contracts. It was appellant, by its own actions and conduct, rendered the Heading 84.66(ii) inapplicable, ' and not that there is anything inherent in the Heading itself that rendered it impracticable;
(j) it is not as if one could reserve one's right to concessional assessment to be exercised as and when contract(s) for spares could, independent of the contracts for plant and machinery be concluded. The mention of the contract(s) for spares yet to be concluded in the appellant's letter dated 12-10-83 is of no significance in the face of the statutory requirements.
6. In the Tribunal itself, on adentical facts, there are two reverse decisions to the appellant's case. They are our Order No.166/85-B2 in Appeal No.587/78-B2 and Order No.141/86-B2 in Appeal No.944/78-B2. We see no reason to differ them.
7. The appeal is, accordingly, dismissed.