Customs, Excise and Gold Tribunal - Delhi
Shri Dinesh Mills Ltd. vs Collector Of Customs on 25 January, 1994
Equivalent citations: 2003(161)ELT894(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. Both these appeals arises from the order-in-original dated 19-12-90 passed by Collector of Customs (Judicial), Bombay and as they pertain to the same issue they are taken up together for disposal as per law. The question that arises for our consideration in this appeal is the grant of the benefit of S. No. 19 of Notification No. 489/86-Cus., dated 18-12-86 as amended by Notification No. 283/89, which reads as under :
"Composite Felt Making Plant including Coating/Garnetting/Needle Looms"
In respect of the imported consignment of 40 packages (35 cases and 5 unpacked packages) declared to contain one number Paper Maker's Felt Needle Punching Machine Type NL/18/I1. The terms of the notification in question are that it exempts the goods specified in the schedule appended thereto falling within the Chapters 84, 85 or 90 of the first schedule and Section 3 of the Customs Tariff Act respectively subject to certain conditions which inter alia are that the importers are Actual Users (Industrial) engaged in manufacture of jute products and registered with the jute Commissioner and that the importer should produce necessary evidence to this effect to the Assistant Collector of Customs at the time of importation. The machineries specified in the Schedule of the subject notification should be such machineries as are suitable for use in manufacturing jute products. The Department did not allow clearance of the goods after the filling of the bill of entry but took up a detailed investigation, so as to examine the importers' claim for duty exemption benefit. The investigation was carried out by S.I.I.B and the officers of S.I.I.B obtained the relevant document/correspondence/ files pertaining to import of the subject machine from the importers, under summons issued under Section 108 of the Customs Act, 1962. They also collected certain documents from M/s. Greaves Cotton & Co. Ltd., Bombay who are the Indian representatives of the suppliers M/s. Dr. Fehrer, Textilmaschinen-fabrik, AG, Austria. Statement of Shri Mayur Desai, General Manager (Finance), Shri S.G.K. Shetty, Sr. Vice-President of M/s. Shree Dinesh Mills Ltd., Shri Vinod S. Patel, Production Manager (Felt Section) and Shri S. Padmanabhan, Vice-President, M/s. Greaves Cotton & Co. Ltd. were recorded under Section 108 of the Customs Act, 1962. The goods were examined by the Customs Officers in the presence of the representatives of the importers Shri Vinod S. Patel, Production Manager, Shri R. Patel, Chief Engineer and Shri A.B. Tiwary, Manager R & D, apart of the representative of Custom House Agent. The appellants were having an Industrial Licence dated 29-4-71 which was granted to them for manufacture of Endless Woven Felts for an annual capacity of 250 tonnes. The same Industrial Licence was re-endorsed on 26-7-90 permitting manufacture of diversified jute products by utilizing jute fibre/jute yarn within the existing licensed capacity of the Industrial Licence, subject to the condition that the company shall not manufacture traditional jute packaging materials like Sackings, Hessian, Jute Twine and Jute rope. The said endorsement was made to the appellant, subsequent to Press Note No. 3, dated 10-7-90 for use of jute fibre, subject to the conditions stated above. This was intimated to the appellants vide Ministry of Textiles' Letter No. Nil, dated 30-7-90. The appellants are well known manufacturers of textile fabrics including woollen fabrics since 1935. The further facts of the case are that on or about October 5, 1987, the appellants made an application to S.I.A. for import of one brand New Paper Makers Felt Needle Punching Machine type NL-18/II having a working width of 10.9 mtrs. along with accessories at a cost of Austrian Shillings 2,33,30,916/- (Rs. 2,68,80,080/-) C.I.F. While making this application, they furnished the following documents :
(a) Form 'E' (CG) duly completed and signed (b) List of items to be imported (c) Proforma Invoice No. 10006275/VKMW, dated 19-1-87 of M/s. Textilmaschinenfabrik Dr. Ernst Fehrer Ag. Austria (d) Leaflet of the proposed machine (e) Industrial licence (f) An undertaking to the effect that by the import of the proposed machine they shall not exceed their licence capacity or 250 mtrs., per annum etc.
While justifying their requirement of the machine intended to be imported by them, the appellants, inter alia stated in their application that the newer method of inter locking fibres called mechanical bonding is done by the Needle Punching Machine. They further stated that due to high cost of labour, raw material, power, the paper manufacturers have shifted to wider and also more sophisticated productive paper machines particularly news print machines and that these wider and high speed machines are required for production of wider and high quality felts with Mono Filament Base Fabrics and Needle punch Fibres. They also indicated that their customers in India are those whose requirements are for wider width of felts for printing wider news prints. According to the importers, the Indian customers for using wider width of felts are as under :
1. M/s. Tamilnadu Newsprint & Paper Ltd., Trichy
2. M/s. Mysore Paper Mills Ltd., Bhadravati
3. M/s. Hindustan News Print Ltd., Kerala They further claimed in their said C.G. application that at present they have two needle punching machines each of 5 mtrs. and 7.87 mtrs. widths and due to the short widths of these machines, it has become a constraint for them to manufacture and cater for wider width non-woven needled felts to the news print industry, as a result a lot of foreign exchange is being spent for import of such felts by the user industry. They further stated that their proposal to import 10.9 meter wider needle punching machine would enable them to supply this wider width felts and thereby save an outgo of valuable foreign exchange from the country for the import of these felts every year. They had further stated that they had already obtained an import licence for import of one No. 11.50 mtrs. wide Cross Lapper and pre-Needling Machine for the formation of the batt which would be fed to the proposed Needle Punching Machine for making the end product. They had stated that unless the proposed Needle Punching Machine of 10.9 mtrs. is imported by them, the utility of the above mentioned Cross Lapper and Pre-Needler Machine will be restricted only to the extent of the width capacities of their existing Needle Punching Machine. Therefore, they had explained that it is essential for them to import the proposed machine so that the preprocessing machinery for which they received the above mentioned Import Licence shall be meaningfully utilized and they can cater to the entire range of non-woven varieties of Paper Makers' Felt required by the Paper and Newsprint Industry in the country. In their C.G. application against Column 5 relating to the requirements of raw-material, the appellant, had indicated that the equipment proposed to be imported is meant for manufacture of wider width non-woven felts required by the paper making industry within the overall Industrial licence capacity. Hence, they had submitted that no extra requirement of raw materials was envisaged. The technical description attached with the C.G. application indicated that the field of application of the machine proposed to be imported by them was for the production of paper maker felts with or without supporting fabric. It was further stated therein that the machine is constructed in confirmity with Dr. Fehier's approved, appended unit design which ensure less vibration during the operation of the machine, even with maximum speed and inherent reliability. The leaflet/catalogue attached with the C.G. application indicated the machine description as Paper Maker Felt Needle Loom NL 18/A and NL 18/B. On or about 24-1-90, the appellant vide their Letter No. 3/DJ/245/90 requested Director (TRU) of Ministry of Finance to extent the similar benefit of duty exemption as is given for Jute Industry to the composite felt making Plant for Textile Industry. They referred to their earlier representation No. CE/DJ-22/13826, dated 27-9-89 and stated that Textile Industry is also facing crisis like Jute Industry and on the same ground, benefit of duty exemption was requested to be extended to a few machines including needle looms to be used in Textile Industry. On or about 31st Jan., 90, the appellant made an application to Ministry of Textiles for concessional rate of duty for Paper Maker Felt Manufacturing machinery, wherein they have stated that they would like to clarify that the pattern of consumption of Paper Makers Felts by user Industries has radically changed in the recent past. They further stated that from the woollen, cotton as well as wool synthetic blended felts used by the Paper Industry in past, the trend is now to switch over to the use of "Needle 100% Synthetic Felts'', which have greater longivity on the paper making machines. They further stated that in fact due to better quality and long life of the new generation synthetic felts, the quantum of consumption of these felts by the Paper Industry in the country has been on the decrease. On or about 10-5-90, the appellant made an application to the Joint Secretary, Ministry of Textiles, Udyog Bhavan, New Delhi seeking concessional rate of duty for Paper Makers Felt manufacturing machinery - Needle Punch Loom and drying equipment, wherein the appellant clarified that the Paper Industry is a core industry and though felt constitutes a small percentage of inputs that go into the manufacture of paper, it is an essential item of component without which paper cannot be manufactured. They further stated in the said letter that there are only a few felt manufacturers in the world and they have an Association which controls the prices of Felts particularly relating to exports to developing countries. They further stated that the consumption of paper is likely to go up with the increase of literacy and industrialisation in the country, through the consumption at present is the lowest in the world. Considering the need and essentiality of Felts for Paper Industry, the appellant had sought concessional import duty at 40% for the machine under dispute. This, however, was turned down by the Ministry of Textiles vide their Letter No. 17.17.89-WT, dated 28th April'90. The appellant vide their letter dated 25-7-90 addressed to the Jt. Secretary, Ministry of Textiles have intimated that in continuation of their Letter No. SGKS:MT:AKN:ND:90, dated 16th instant, they have to state that they have not given the percentage composition of the fibres in their products as required in Para 5 of Press Note No. 3 of 10-7-90. Para 5 of the aforesaid Press Note stipulates that the jute units as well as the textile units undertaking production of the diversified jute products would invariably specify the percentage composition of the fibers used in their products. The appellant further indicated in the said letter that various types of Felts and Industrial Clothing are manufactured according to the specific requirement of the customers and as such the percentage composition varies from customer to customer. They further stated that in the manufacture of their products (Felts), they intend using jute fibres with synthetic fibres or wool, and jute fibres content would range between 25% to 40% and the remaining will be either synthetic fibre or wool. During investigation of this case, Deptt. came to know from the correspondence of the appellant that M/s. Greaves Cotton & Co. Ltd. is the indenting agent in India for the machine imported. Accordingly M/s. Greaves Cotton & Co. Ltd. were contacted and the documents relating to the import of this machine were collected. M/s. Greaves Cotton & Co. Ltd. furnished Agency Agreement dated 1-1-81 vide their letter dated 10-11-90. The said Agency Agreement mentions about different subjects like sales activity, prices, sales, delivery and payment conditions, acceptance of orders, invoicing, payment of invoices, commission for transactions, amount of commission etc. Under the clause regarding amount of commission, a commission amounting to 10% for machines respecting to List 1 (which inter alia covers sheet machine Laboratory needle loom, pre-needling machine for paper makers needle felts etc.) and 5% for machines respecting to list 2 (which covers various types of paper maker felt needle loom) are indicated. There is also two more lists 4 & 5 for which 5% commission is payable. These commissions are payable under Para 16 of the said Agency Agreement, based on Ex-Works value.
M/s. Greaves Cotton & Co. Ltd. further clarified vide their letter dated 10-11-90 that the machine imported is paper maker felt needle punching machine type NL 18/11 and that the whole transaction was negotiated and dealt with by and between Dr. Ernst Fehrer and appellant. They further added that they have not raised any indent since the appellant have placed an order direct on the manufacturers against the licence issued to them. They further confirmed that similar machines was not imported earlier by any customer in India. As regards the Agency Commission, they stated that it was agreed between Fehrer, the appellant and M/s. Greaves Cotton & Co. Ltd. that commission equivalent to 1.5% of the ex-works value of the machine would only be paid in India in Rupee currency to M/s. Greaves Cotton & Co. Ltd. by the appellant and subsequently advised that the licences does not cover this value and hence, they are unable to pay the commission. The appellant also advised that they would give M/s. Greaves Cotton & Co. Ltd. future contracts for technical consultation and upkeep of Machinery.
M/s. Greaves Cotton & Co. Ltd. also furnished certain catalogues from the manufacturer. One such catalogue deals with the machinery related to paper maker felt machines. Model NL18 has been described in the said catalogue as high capacity machine for finish needling of one side of the felt. It is further described therein that, 'with this basic model - years ago - the success of FEHRER machines in the paper maker felt industry began'. Manufacturer catalogue further describes that paper maker felt machines are for the production of modern high technical felts for the wet and dry sections of all types of paper and card board making machines and that, with a needling technology newly introduced by Fehrer, a new generation of multi-layer felts is produced for several years. These felts are said to show better dewatering properties at higher speeds and have a longer life resulting consequently in a higher efficiency, as required by felts for the largest and fastest paper maker machines of world.
2. During the course of investigation, the statement of Shri S.G.K. Shetty, Sr. Vice-President of the appellant company and statement of the General Manager Shri Mayur Desai was also recorded by the Investigating Officers. Shri S.G.K. Shetty had inter alia submitted that till March '89, they were allowed to manufacture textiles using predominantly wool and the licence was subsequently amended to use cotton and synthetic fibre; further he added that their licence was amended on 30-7-90 to use jute fibre. He had stated that they were not engaged in manufacture of jute products till they got endorsement under Entry 23(2) of IDR Schedule. He had also mentioned that they have intimated to Textile Ministry that they intend to use 25% to 40% of jute fibre and the remaining would be either wool or synthetic. He had further stated that they had no intention of manufacturing jute products including paper maker felt out of jute fibre at the time of import application for needle loom i.e. (Paper Maker Felt Needle Punching Machine) which is under clearance at present. He had stated that they had approached Ministry of Textiles, New Delhi for obtaining concessional duty for the machine under clearance which was rejected without assigning any reason. Shri Mayur Desai, General Manager (Finance) and Shri Vinod S. Patel, Production Manager in their statement corroborated the statement given by Shri S.G.K. Shetty. Shri Vinod S. Patel, to a specific query, had answered in negative to the question whether paper makers' felts contained jute fibre. He had further clarified that the machine imported by them is capable of making endless paper maker's felts having base fabric width up to 10.96 mtrs. However, the finished fabric will have less width depending upon contraction. To another query regarding the scope of the entry No. 90 of the Notification No. 283/89-Cus., Shri Patel had stated that the composite plant for making certain type of felts needs garnetting machine and needle loom. According to him, garnet-ting machines are needed where fibres are opened and laid and then the same are offered to needle loom. He had further stated in this connection that certain types of felts require garnetting and needle loom which includes paper maker's felts too. In this connection, he further clarified that the imported machine can be used for making paper maker's felts up to 10.97 mtrs. base fabric width from fibres specified by him (i.e. synthetic fibre wool, cotton and combination of all these). Shri S. Padmanabhan, Vice-President of M/s. Greaves Cotton & Co. Ltd. in his statement has stated that their suppliers had produced various types of Needle Punching Machines, depending on customers requirements for production of non-woven fabrics ranging from 400 Gms./sq. mtrs. to 3.000 Gms./sq. Mtrs. Some of the machines such as NL-286 are used for pre-needling, NL-9/R/S are used for upstroke needle etc. He further stated that the appellant had imported Model No. NL-18/II which is machine used for manufacture of paper maker's felt and other felts for various width applications. According to him the process involved is that the fibre is to be processed and fed into the machine called Hopper, conveyor and do the pre-needling, cross lapping and then finally do the feeding into the paper maker's felt machine and would into rolls before delivery. He also confirmed that during several discussions the appellant had with the overseas principals, various applications/end use were discussed. During these discussions, the possible fibre to be used on the imported machine were identified to be synthetic/wool or combination of both for manufacture of paper makers felt.
3. Investigating Officers further obtained information as to whether or not the paper makers felts contain any jute fibre. The write-up submitted by M/s. B.K. Paper Mills, Bombay indicated that as far as their knowledge goes, there is no jute based paper making felts. They further confirmed that they have never used any jute based paper making felts in their paper mills so far, M/s. Ballarpur Industries Ltd., Bombay, another paper manufacturing unit also confirmed that felts being used at their Ballarpur Unit do not have any jute contents. The appellant had also addressed a letter dated 20-6-90 to the Industrial Credit & Investment Corporation of India Ltd. seeking enhancement of loan amount of Rs. 2.37 crores, on account of payment of Customs Duty payable on the subject machine. They had further pointed out in the said letter that the Customs duty and clearance charges at the rate of 82% would be Rs. 3.18 crores.
4. Therefore, on the basis of these investigations, the Deptt. issued a show-cause notice. It was urged that Notification No. 489/86-Cus., dated 18-12-86, as amended by Notification No. 283/89-Cus. covers certain machineries as per the schedule annexed to the notification and which are suitable for manufacturing of certain jute products and that S. No. 19 of the said schedule to the notification covers composite felt making plant including coating/garnetting needle looms, which is meant for manufacturing jute felts. Therefore, it was urged that the claim of the appellant for benefit of the subject duty exemption notification of assessment of the imported goods, was not tenable. The show cause notice summarised the charges on the basis of the above facts and pointed out to the appellant that their application to S.I.A. on 5-10-87 and in their subsequent letters dated 24-1-90 and 31-1-90 addressed to the Director (TRU), Ministry of Finance and Ministry of Textiles and also by their letter dated 10-5-90 addressed to the Ministry of Textiles, they had been stating that the Needle Punching Machine type NL-18/II proposed to be imported by them is for manufacture of paper makers felts to be used in paper/newsprint industry. The manufacturer catalogue collected from M/s. Greaves Cotton & Co. Ltd. also described the imported machine as Paper Makers Felt Machines meant for production of modern high technical felts for the wet and dry section of all types of paper and cardboard making machines. The show-cause notice has also highlighted that the investigations have revealed that there is no jute based paper making felts meant for use in paper/newsprint industry and this had been confirmed by two of the user industries in the paper manufacturing field. In this regard, the write-up given by M/s. B.K. Paper Mills Ltd. and a letter from M/s. Ballarpur Industries Ltd. was relied. Another letter of the Importer dated 31-1-90 addressed to the Ministry of Textiles was also relied, in which the Importer were discussing the pattern of consumption of paper makers felts by user industries, have stated that from woollen, cotton, as well as wool synthetic blended felts used by the paper industry in the past, the trend is now the switch-over to use of "Needled 100" synthetic felts", which have greater longivity in the paper making machines. The show-cause notice urged that there is no mention of jute fibres in the aforesaid letter. Therefore, it appears that paper makers felts cannot have jute fibre as constituent material. The correspondence and statements by the importers was also relied which revealed that the importers have been planning to import paper makers felts making machine for manufacturing of such paper makers felts which do not have any jute content. Therefore, it was alleged that imported machine was for meeting the requirement of production of wider non-woven paper makers felts and for having maximum utility for the other related pre-processing machines (for which they had obtained separate import licences) like Cross Lapper and Pre-Needler Machines. It was also alleged that the importer's claim for duty exemption benefit for this machine to be used for manufacturing felts, was turned down by Ministry of Textiles. Therefore, it was alleged that the importers having failed to obtain duty exemption for paper makers felts manufacturing machine, decided to make a wrongful claim of duty exemption for the same paper makers felts needle punching machine by making wrong declaration that the paper makers felt needle punching machine would be used in manufacture of paper makers felts containing jute.
The Department also relied on Section Notes 3, 4 and 5 of Section XVI pertaining to machinery and mechanical appliances of Customs Tariff Act, 1975, which appeared to indicate that composite plant with two or more machines fitted together would from a whole. The imported machine, as per catalogue, had been described as single "High capacity machine for finishing needling of both sides of the felts". Therefore, it was alleged that the imported goods are nothing but a finishing machine. Therefore, the S. No. 19 of the said notification would not fit into the claim of the Importer.
It was also stated that in the Textile Technology parlance, the term 'composite plant' would stand for number of units/machines which manufacture the finished product (the finished felt) through various intermediary processes starting from the basic raw-material (synthetic fibre). In this case, pre-processing like cross-lapping and pre-needling for the formation of the batt are done separately through seperate machines and the subject imported machine performs the finishing operation of needle punching also. By their letter dated 5-10-87 to S.I.A., they had stated that they had already obtained an import licence for import of one cross-lapper and pre-needling machine for the formation of the batt, which would be fed to the proposed needle punching machine for making the end product (i.e. paper makers felts). They had further explained that it was essential for them to import the proposed machine so that the pre-processing machinery for which they received the above mentioned import licence shall be meaningfully utilised and that can cater to the entire range of non-woven variety of Paper makers felts. In view of the foregoing, it was alleged that the subject needle punching machine by itself would not qualify to be classified as composite felt making plant. It was also alleged that they were required to pay Customs Duty as per Rule 9 of the Customs Valuation Rules, 1988, on 1.5% commission which they had agreed to pay to M/s. Greaves Cotton & Co. Ltd. in Indian Rupees which works out to Rs. 5,81,632/-. The correct assessable value of the goods was also worked out and duty demanded as per the following calculation :
A. ASSESSABLE VALUE
1.
Declared C.I.F. Value A. Sh.
2,59,79,598.00
2. Conversion in Indian Rupees (at the exchange rate Rs. 100 = A. Sh. 67) Rs. 3,87,75,519.00
3. ADD : Agents Commission @ 1.5% vide L. No. dated 11-90 of M/s. Greaves Cotton & Co. Ltd.
Rs. 5,81,633.00 TOTAL Rs.
3,93,57,152.00
4. ADD : Landing Charges @ 1 % Rs. 3,93,572.00 TOTAL ASSESSABLE VALUE Rs. 3,97,50,724.00 B. DUTY PAYABLE Under heading 8449.00 of Customs Tariff Act, 1975 read with Notifica-tion No. 59/87-Cus. at the rate of 35%+ 45% + CVD Nil Rs.
3,18,00,579,00 The allegations were summed up as follows :
(a) The goods in question should not be confiscated under Section 111(m) of the Customs Act, 1962.
(b) The agency commission alleged to have been agreed to pay/or payable to Indian agent M/s. Greaves Cotton should not be added to assessable value in terms of the provision of Customs Valuation Rules, 1988 for the purpose of levy of the customs duty under the appropriate heading of the Customs Tariff Act, 1975.
(c) The benefit of the concessional rate of duty claimed under Notification No. 489/86-Cus. as amended by 283/89 should not be disallowed in view of the facts explained in the foregoing paras and why normal rate of duty applicable for the said machine under Heading 8449.00 read with Notification No. 59/86-Cus. (35% + 45% + CVD NIL) which works out in this case approximately Rs. 3.18 crores should not be recovered on assessment of goods in question and
(d) Why penal action should not be initiated against them under Section 112 of the Customs Act, 1962.
5. The ld. Collector after granting the full and final opportunity to the importers passed by the impugned order, the ld. Collector has upheld the department's contention and has drawn inferences from the importers' admissions both in the statements given to the Investigating Officers as well as the correspondence, the importer had with the Ministry of Textiles, ld. Collector has held that -
"Such a sophisticated machine is certainly nor required for manufacturing felt from jute fibre/yarn. Obviously such felt made of jute are neither suitable nor required in the paper making industry. Such felt may have various other purpose but not in the paper Industry as has been certified by several Industries engaged in the manufacture of paper. In fact all evidence disclosed in the show-cause notice establishes that this machine was imported by the party for the purpose of making paper makers felt as per the requirement of the paper Industry and the newsprint Industry.
In the circumstances considering the high value of the machine, its intended design and its sophisticated technology, I have no hesitation in holding that this machine is only for the purpose of manufacturing paper makers felts of width 10.9 metres. This certainly was neither intended for making jute felts as such jute felts could be manufactured by other cheaper machines. The contention that jute felts also could be manufactured by this machine is only to take advantage of the exemption notification. The fact is that even if jute felts were to be made on these machine that would not be its proper use. I, therefore, hold that the importers are only making a claim that they could use this machine for manufacturing jute felts only for the purpose of getting advantage of the exemption notification. The machine is certainly not intended for manufacturing jute felts. In any case the other two machines which the importers planned to import viz. 11.50 metre width cross lapper and the pre-needling machine all point one direction that this particular machine is intended by them only for manufacturing paper makers felts machine required for paper Industry and newsprint Industry. The use of this machine for making jute felts even if that was so, would be misuse only as other needle looms which would be cheaper for manufacturing jute felt would be suitable for making such jute products".
As regards the question as to whether the imported machines falls within the description in S. No. 19 of the said notification, the ld. Collector has summarised the finding in Paras 53 and 54 of his order as follows :
"Under this Sr. No. 19, the exemption from duty is to a composite felt making plant including coating/garnating/ needle looms. From the perusal of the entry it is clear that the exemption is available to a composite felt making plant and while importing a composite felt making plant the exemption is also available to machines required for coating/garnating and needle looms. The expression "including" only means that for importing the composite felt making plant, an importing can also import along with it the other three machine viz. coating/garnating/needle looms even though these three machines may not necessarily be part of the composite felt making plant. This is how the Entry at Sr. No. 19 of the notification has to be read. Under this Sr. No. it is seen that composite felt making plant and the other three machines are permitted for import with exemption. The three machines can be imported with exemption under this Sr. No. only when the basic import is of a composite felt making plant and not other wise. If an importer does not import a composite felt plant, he cannot import the machine for coating/garnating needle looms independently. This is how the entry has to be understood. Mr. Srinivasan contended that even without importing a composite felt making plant, a needle loom punching machine can be imported, is, therefore, not tenable and is rejected. In my view under entry at S. No. 19 the import has to be of a composite felt making plant but while importing such a composite felt making plant, a facility has been given to the importer to import the other three machines which may not necessarily be an integral part of such a composite felt making plant. This is how the entry has to be interpreted.
Now coming to the question whether the machine imported comes in the category of Sr. No. 19 it is seen that the machine as imported is not a composite felt making plant. In the first plant it is only a felt needling machine and the other two machines with it which according to the importers are prerequisite are cross lapper and pre-needling machine. With those two machines, this will constitute a composite felt making plant but certainly not in the context of making a felt from jute fibre/yarn. This plant will have a composite plant for making paper makers felt from synthetic fibre and not from jute fibre/yarn or by using jute fibre/yarn to the extent that such products may come in the category of jute products".
Ld. Collector has also rejected the arguments of the consultant made before him by giving detailed reasonings. In the final result, the ld. Collector has held that the importer is not entitled the benefit of the exemption notification in question and therefore, order for assessment on merits without extending the benefit. He has further ordered that proceeding under Section 111(m) is not attracted as there can be no mis-declaration merely on the ground of the importer's claim by the benefit of a particular notification. He has also held that there is no evidence placed by the Deptt. on this ground. Therefore, he has confiscation proceedings under Section 111(m) of the Customs Act. The Deptt. is aggrieved with this portion of the order and hence they have filed a separate appeal.
6. We have heard Shri K. Srinivasan, ld. Consultant for the appellant and Shri B.K. Singh, ld. SDR for the Revenue. Ld. Consultant submitted that paper makers felts is also a felt and the appellants were manufacturing this paper makers felts for a long time. He submitted that there is no dispute about the import licence and the machine having been covered within the description of the licence. He submitted that the notification in question exempts specified jute machinery from basic and additional duty. The Govt. had envisaged this exemption in order to promote and protect the jute growers in terms of the national policy. The Government had been encouraging all the Industries to use jute in non-woven Industrial products for domestic as well as export purpose. The Govt. had announced a multifibre policy on 8-7-90. In this context, the IDR Act was amended to permit textile units (synthetic woollen and cotton) to use jute fibre and yarn also to manufacture jute products. Pursuant to all this change in policy the appellants applied for re-endorsement of their Industrial licence and the same was done on 26-7-90, permitting the manufacture of diversified jute products by utilising jute fibre/jute yarn within the existing licenced capacity of the Industrial licence (subject to the condition that they would not manufacture traditional jute packing materials like sacking, hessian, etc). Ld. Consultant submitted that the appellant Industry had set-up their own research wing and out of research they had been successful in utilising jute fibre in the manufacture of geo-textiles. This geo-textiles was brought out by them in their trade name "Dinesh Mat" which had verified use in Civil Construction etc, viz. railways, pavement overlays, dams, drains, canals and coastal protection.
7. Ld. Consultant brought to our notice several research papers brought out by the Indian Jute scientists on the utilization of jute fibre for industrial purpose. Therefore, the endorsement made on Industrial Licence was a clear indication that they were permitted to manufacture industrial jute products. In terms of this amendment to their licence policy, they had imported the said machine for utilizing the same which was suitable for multi-fibre application including jute fibre. Therefore, the appellants claimed the assessment under sub-heading 8446.29 under Chapter 84 of the First Schedule of the Customs Tariff Act, 1975 with the benefit of the said notification. The notification exempts the goods specified in the Schedule falling within Chapters 84, 85 or 90 of the First Schedule to the Customs Tariff Act, 75, from the whole of the duty of Customs and whole of the additional duty leviable thereon, subject to the condition that the importers are Actual Users (Industrial) engaged in the manufacture of jute products and registered with the Jute Commissioner. He submitted that the Importer had produced necessary evidence that they had registered with the Jute Commissioner and as there was endorsement of the Industrial licence, the import was proper and hence the benefit should have been extended. The ld. Consultant also referred to the Para 7(3) of the Import Policy, April 1990 - March '93, Volume I defines "Actual User" (Industrial) as an industrial undertaking, be it in the large scale, small scale or cottage industries sector, engaged in the manufacture of any goods for which it hold a valid licence or Registration Certificate from the appropriate Government authority, wherever applicable. Therefore, he submitted that they were specified with definition, they were, therefore, entitled for the exemption. He also referred to the 100% examination from the Customs Authorities including the reference made to the article "Needle Felt" in Wool Hand Book furnished by the appellants. Thereafter, the department had delayed in clearing the goods hence the importers were compelled to go to High Court of Bombay and have a direction for issue of show-cause notice and the same was issued within a couple of days of going of the direction by Hon'ble High Court and thereafter the impugned order was passed. As per the order of the Hon'ble High Court, they had deposited Rs. 1.55 crores in cash and furnished bank guarantee of Rs. 1.58 crores and taken clearance of the cash. The ld. Consultant submitted that the Collector having dropped the allegation regarding the inclusion - of Agency Commission in the assessable value and also the mis-declaration of facts, therefore, it followed that the Collector have deemed to be accepted the transactions value in the present case. Therefore, there was no scope for issuing a less charge demand under Section 28 of the Customs Act, which is a provision for the issue of demand for duty which has not been levied or has been short levied or erroneously refunded. Therefore, the order was required to be set-aside on this ground also. He further pointed out that the Collector had also accepted the fact that the textile mills had been permitted to diversify their activities and allowed to manufacture jute products. The importers have also got their Industrial licence endorsed for the manufacture of jute products. The non-grant of benefit of the exemption notification is, therefore, not proper, as there was no violation of any of the terms of the notification; the ld. Consultant further pointed out that the notification granted exemption to Needle Loom which had been specifically included in the schedule of the notification. He submitted that the felts used on paper machines can be broadly classified, depending on the positions where they are used as forming felts, wet felts and dry felts. He pointed out to the explanation given on this aspect in para 4 of the ground of appeal which are noted herein below :
"Forming felts are generally woven type with various weave patterns. They are made from metallic fine wires such as Phosphorous bronze. Recently these type forming felts are being made from synthetic mono-filaments.
Wet felts, as their name implies, are used in the wet zone of the paper machine where a substantial amount of water is extracted from the paper. Wet felts are intended to perform chiefly (a) to impart required finish to the paper (b) to handle, i.e. transport the water extract from the wet paper sheet by pressing (c) to protect the weak paper sheet against the hydraulic pressure generated by pressing (d) to provide support to transfer the paper sheet from forming to dry zone in a continuous manner (e) it acts as power transmission belts to drive various rolls. To perform above function satisfactorily, a wet felt should have required strength, permeability, surface smoothness, resiliency, resistance to the chocking by paper fines, easy cleanibility and resistance to the chemicals used. Depending upon the manufacturing processes/techniques used for making paper maker's felts, the wet felts can be mainly classified as conventional felts, Batt on base, Weftless, Bart on mech., Combination, etc. Conventional felts are made from 35% synthetic/65% wool by weaving and subsequent milling raising technique. They are used on low speed paper machines producing Kraft papers and boards. Batt-on-base felts are made by needling fibrous layers on spun woven base cloth. These felts generally are of 35% to 50% synthetic fibre content. These type of felts are normally used on medium speed paper machines. Batt-on-mech felts are made by needling fibrous layers on filament woven base cloth. Combination type wet felts is similar to batt-on-mesh the difference being the multi-layer base fabric. Depending upon the paper machine press zone configuration/types, the felt making parameters are suitably changed to achieve required strength, surface smoothness, permeability etc. necessary for a particular press configuration/types and its operating conditions.
Dryer felts, as their name implies, are used in the dry zone of the paper machine where the paper is finally dried. The felt, here, provides a proper contact of the paper sheet against hot cylinder. At the same time, the felt conveys the paper sheet through the drying cylinders. These type of felts are generally woven type made from cotton and synthetic fibre blends. Recently, synthetic filament woven felts are also being used in dryer felts.
Paper machines can broadly be classified as cylinder mould type, foundrinier type, and yankee type. Cylinder mould type are generally low speed type and used for making boards, foundrinier type are used for making newspapers, writing reading bond papers etc. whereas yankee type machines are used for making krafts, poster papers, tissue paper etc. There are certain machines which have an arrangement by which suitably adjusting the beds the needle felt could be manufactured either as an endless felt or as a continuous felt. The endless felt is one which is formed in a circular shape with the two ends fused together in a seamless manner, whereas a continuous felt is a long continuous length of felt manufactured by the needle felt, The endless felt is used for the cylinders and the continuous felt for other requirements of the paper machine. In the Fehrer machine imported by the appellants. The bed beam can pivot on one side and the other side of the beam is open so that the endless felt can be loaded or unloaded on the beam. Such a configuration is normally used for Paper Maker's Felt that is why the machine is called Paper Maker's Felt Needle Punching Machine (Needle Loom). In certain other machines instead of the bed beam pivoting, it can be retracted to the right or the left. The Morrison Berkshire Inc. of US make is such a Paper Maker's Felt machine where the bed beam retracts. The machine is known as "Needle Loom System for Paper Maker Felts."
Pointing out to the above portion of the technical aspect of the machine, ld. Consultant submitted that the nomenclature of the machine only denotes that it is capable of manufacturing Paper Maker's Felt, namely, endless felt and not as though it can only take any fibre other than jute fibre. He submitted that needling is a technology by which textile fibres, natural and synthetic, are mechanically bonded and on this machine imported by the appellants both endless as well as continuous felt could be made with any natural or synthetic fibre and blends thereof including jute into felt. He pointed out the following ground in the Appeal Memo to argue that Needle Loom NL-18/II is a composite Felt Making Plant within meaning of the expression of Sr. No. 19 of the said Notification :
"The Feeding Device/Feeder consisting of feed table, feed table roller and feed weight compensator, feeds the raw material, namely layers of open fibres, to the needling zone. The second area is the Needling Device consisting of Needling Beam, Bed Plate and Stripper Plate where by the repeated movement of needle through the fibre layer sufficient entanglement of fibres with each other is achieved giving the felt the required dimensional stability and strength. The third zone is the Stretch/Tension Carriage consisting of tension roller, tension carriage beam and side frames. The avoids crease formation in the felt and controls the shrinkage of the felt during needling, the felt being held under the required amount of tension. This adjustable tension is achieved by the movement of tension carriage on toothed racks and rails. The fourth and final zone is Feed Outlet Devices consisting of outlet rollers and deflection rollers. The motion of outlet roller gives the required amount of traverse to the felt to achieve the required amount of needle punching of felt; this motion also allows the felt to be taken out of the machine. The deflection roller provides a positive grip between felt and outlet roller surface. The felt is then edge trimmed to required width of felt. The felt thus obtained is a needled felt ready for end use."
Ld. Consultant referring to the word "including" appear in the description in S. No. 19 of the Notification submitted that the expression "including" does not exclude but specifically includes coating, garnetting, needle loom in the expression Composite Felt Making Plant. In this context, he referred to the clarification issued by the Ministry of Finance, Deptt. of Revenue by their letter dated 27-7-90. He submitted that the clarification was with regard to import of Composite Felt Making Plant and as to whether Dilo Needle Loom, Dilo Coating Machine and Dilo Garnetting Machine will make such import ineligible for the notification. The Ministry had clarified that the term "including" should not be interpreted as "with'. Therefore, the benefit was also granted to the other machines referred to. In this context, he submitted that the terms of the notification should not be interpreted in such a way as to make the notification otiose. In this context, he referred to the passage appear in 256 Maxwell on the Interpretation of Statutes, 12th Edition, which states :
"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."
Ld. Counsel relied on the following rulings which layed down the rules for interpretation of the terms in the notification :
1. Doy Pack Systems Pvt. Ltd. v. Union of India -1988 (36) E.L.T. 201 (S.C.).
2. Mahalaxmi Oil Mills v. State of Andhra Pradesh - 1988 (38) E.L.T. 714 (S.C) Para 11.
3. Union of India v. Wood Papers ltd. - 1990 (47) E.L.T. 500 (S.C.) Paras 2 and 3.
4. Hemraj Gordhandas v. H.H. Dave, Collector of Central Excise and Customs, Surat and Ors. - 1978 (2) E.L.T. (J 350)
5. Tata Oil Mills Co. Ltd. v. Collector of Central Excise - 1989 (43) E.L.T. 183.
Ld. Counsel also pointed out that the notification in question was a time bound notification which expired on 31-12-90 and a new notification was brought by Notification No. 1/91-Cus., dated 1-1-91 with 25% duty. However, the conditions were same but Notification No. 7/91, dated 16-1-91 introduced a new condition. However, this did not apply to the present case. He submitted that the imported machinery is a Composite Felt Making Plant and therefore, the use of jute also along with other fibres did not preclude the importer from claiming the benefit of the notification.
8. Ld. SDR Shri B.K. Singh appearing for Revenue pointed out that the goods were described in the bill of entry as Paper Makers Felt Needle Punching Machine (Needle Loom) type NL-18/II. This description given in the bill of entry was totally different from the one appearing in the notification. He pointed out to the material on record which has been relied by the Department to show that the importer also did not intend to utilise the machine for the purpose of manufacturing jute products. He pointed out that the notification had come much later than the appellants proceeding to finalise the deal in importing the machinery. He also referred to the statements of the parties and the agreement between M/s. Greaves Cotton & Co. Ltd. and the Importer. By these materials, it is clear that the appellant had intended to import this machinery for the purpose of expansion programme and not with a view to have a jute industry. Further, he pointed out that the appellant had not produced any evidence with regard to the utilization of jute fibres for manufacturing of the jute products. Even if they had done so after the clearance of the machinery, it was in a marginal way and as per their own admission, it was not more than 5% of their production. They had not purchased any production figures nor any evidence to show as to what extent they would be utilising the machinery for the purpose of manufacture of jute products. On the other hand their production figures clearly showed that what was manufactured from these machines was not jute products but paper makers felt. Ld. SDR pointed out to the charge in the show-cause notice and submitted that the importer had not imported a composite plant within the meaning of Notes 3, 4 and 5 of Section XVI of Customs Tariff Act, 1975 which indicated that composite plant with two or more machines fitted together would form a whole. As against this, the imported machine as per catalogue submitted by the suppliers, had described the machinery as single "High Capacity machine for finishing needling of both sides of felts". Thus, the machinery was only a finishing machine and not a Composite Felt Making Plant. He submitted that composite plant would stand for number of units/machines which manufacture the finished product (the finished felt) through various intermediary processes starting from the basic raw-material (synthetic fibre). In this case, pre-processing like cross-lapping and pre-needling for the formation of the bett were done separately through separate machines and the imported machine was capable of doing the finishing operation of needle punching. Therefore, the licence was granted for import of one cross lapper and pre-needling machine for the formation of the beet, which would be fed to the proposed needle punching machine for making the end product (i.e. paper makers felts). Therefore, the ld. SDR submitted that what was imported by the importer was not as per the licence and also is not fulfiling clarifications of the description given in S. No. 19 of the notification. He also pointed out that the literature and the catalogue produced by the importer did not mention about the jute felt in the paper making felt. The machine was also not designed for the use of jute felt. He also submitted that the jute; felt cannot be used in the geo-textiles as they very purpose of geo-textiles is not the function of jute felt. The use of jute felt in the geo-textile is only for the purpose of pregnation and it did not bring out any jute products. The notification was for the importing machinery which manufactured jute products and by no stretch of imagination it can be said that geo-textile used in Civil Engineering is a jute product. In the trade geo-textile was not considered as a jute product and the bill of entry also did not describe the machinery as paper makers felt. The imported machinery is of a very high value and it is for the production of endless felt which is used for paper industry. Referring to the Ministry's clarification with regard to the word "including" to be react as "with", the ld. SDR submitted that this clarification does not help the importer as the present machine does not satisfy, the basic requirement of the description in S. No. 19 of the notification. He further submitted that the notification has to be read strictly and the terms cannot be enlarged beyond the scope of the notification. In this context, he relied on the following rulings :
1. Rohit Pulp & Paper Mitts Ltd. v. Collector of Central Excise - 1990 (47) E.L.T. 491 (S.C.)
2. Shri Bankey Beharilal Board Mills v. Collector of Customs - 1990 (47) E.L.T. 266.
3. Duncan Agro Industries Ltd. v. Union of India - 1989 (39) E.L.T. 211.
4. Bharat Cottage Industries v. Union of India - 1992 (59) E.L.T. 30 (Bombay).
5. Ralliwolf Ltd. v. Union of India - 1992 (59) E.L.T. 220 (Bombay).
6. Collector of Customs v. Marine Mercantile Co. - 1993 (63) E.L.T. 452.
Ld. SDR has further submitted that the words "engaged in the manufacture of jute products" used in the notification meant that they should have been carrying on a business of manufacture of jute products. In this context, he referred to the terms engaged in manufacture as appearing in "Words & Phrases Permanent Edition Vol. 14A". He further submitted that the Tribunal rejected a similar plea as in the case of Collector of Customs v. Renewable Energy Systems Ltd. in Order No. C/140/93-B2, dated 26-10-93. By a majority order the Tribunal had laid down a clear test with regard to the strict interpretation of the words in the notification relying in the ruling of Hon'ble Supreme Court rendered in the case of Collector of Central Excise v. Fusebase Eltoto Ltd. [1993 (67) E.L.T. 30 (S.C.) = 1993 (48) ECR. 2]. He submitted that this ruling covered the facts of the present case.
9. We have carefully considered the submissions made by Shri K. Srinivasan, ld. Consultant for the appellant and Shri B.K. Singh, ld. SDR for the Revenue. There is no dispute with regard to the classification of this product nor with regard to the import licence. The Deptt. had charged mis-declaration under Section 111(m) of the Customs Act. The ld. Collector has held that there is no mis-declaration and had dropped this charge. The Revenue is aggrieved with this portion of this order and they have filed a separate appeal with a plea that the importer should be penalised for having contra-vented - Section 111(m) of the Customs Act, 1962. The facts of the case have been narrated with great detail including the statement of the parties as well as the correspondence recovered by the Investigating Officers in this case. The ld. Collector after having appreciated the facts and the allegations made in the show cause notice has concluded that there is no dispute raised on any of the facts narrated in the show cause notice. In Paras 48 and 49 of the impugned order, the ld. Collector has given a background of the case. The same is reproduced herein below :
"Regarding the first question I find that the imported machine in, and there is no dispute about it, a paper maker's felt needle punching machine Type NL-18/11, to understand as to what this machine, is a little background of the case is necessary. Based on the correspondence of the importers themselves with different authorities and the supplier, which has also been discussed extensively in the show-cause notice, an exact idea about what the machine is can be had. The importers are engaged in the manufacture of paper maker felts and for this purpose they already had two needle punching machines of 5 mtrs. and 7.87 mtrs. width. The demand in the market for paper maker felt was for felts of greater width and for this purpose the importers wanted a machine which could manufacture paper maker felts of width 10.9 mtrs. When the importer wanted to import a machine of this type they also separately obtained import licence for certain other connected machines. The necessary requirements for other machine was met by them by importing one 11.50 metre width cross lapper and pre-needling machine. In fact when they obtained licences for these two items then they made a CG Application for importing this particular paper maker felt needle punching machine. The idea was that the three machines put together would be able to produce a paper maker felt of a Size 10.9 metre wide. This machine has been constructed with a particular design which ensures less vibration during the operation of machinery even with maximum speed and inherent to the reliability. In fact in their application dated 30th Jan'90, Ministry of Textiles for getting concessional rate, importers themselves stated that the trend now was to switch over to the use of needle 100% synthetic felts which have greater longevity on the paper making machine.
49. It is with the idea of getting this type of a paper makers felt needle machine that the importers approached a well known manufacturer of such machines viz. Fehrer. This particular manufacturer of Austria has a name in manufacturing paper makers felt needle machines. After negotiating with this manufacturer this particular tailor made machine was manufactured. In fact the representative of the Foreign manufacturer visited India and after ascertaining specific requirements of the importers this particular machine was manufactured. The catalogue of the machine describes it that this is suitable for the production of the modern high technical felts for the wet and dry sections of all types paper and cardboard making machine. It is further stated that the machine has all the characteristics as required by felts for the largest and fastest paper making machines of the world. All through the catalogue it is clear that the machinery in question is a paper makers felt needling machine for the purpose of manufacturing paper and cardboard."
From the reading of these paragraphs and the narration of the facts, one thing is very clear which is uncontraverted and that is the impugned machinery was negotiated and purchased solely with a view to fulfil the expansion programme of the appellant factory. The appellants were manufacturing paper makers' felt which was being supplied to paper mills and the machine in question has been constructed with a particular design which ensures less vibration during the operation of machinery even with maximum speed and inherent to the reliability. As has been noted by the ld. Collector in his order which is not disputed, that the plea of the importer for seeking duty relief for this machine was rejected by the Govt., Ministry of Textiles vide their Letter No. 17/17/89-WT, dated 28th April '90. The ld. Collector has also noted the correspondence, the appellant had with M/s. Greaves Cotton & Co. Ltd. The said agent by their letter dated 10-11-90 has stated that the machine imported is paper makers felt needle punching machine type NL-18/II and that the whole transaction was negotiated and dealt with by and between Dr. Emst Fehrer and the appellant. They have confirmed that such a machine had not imported earlier by any customer. The catalogue furnished by them had described the machinery as high capacity machine for finishing needling of one side of the felt. It is further described therein that with this basic model the success of Fehrer machine in the paper makers felt industry". The catalogue further described the paper maker felt machines are for the production of modern high technical felts for the wet and dry sections of all types of paper and cardboard making machines and that, with a needling technology newly introduced by Fehrer New Generation of import layer felts is produced for several years. These felts are set to show better dewatering process at high speed and have a longer life resulting consequently in higher efficiency as required by felts for the largest and fastest paper making machines of the world. It is not in dispute that for manufacturing paper makers felt, jute fibre is not utilized. In view of its inherent weaknesses and inability for with standing the necessary strength required by a paper felt. We have seen the entire correspondence and also the licence for which this machinery was imported and we are convinced that this machinery was not imported for manufacturing jute products. The appellants had initiated the process for importing this machinery on or about Oct. '87. The application filed for getting licence and the undertakings given by the appellant to the Ministry was for expansion purpose of the manufacturing process of the paper makers felt. The appellant also had taken steps to pay the excise customs duty by getting sanction of loan of Rs. 3.18 crores from Industrial Credit and Investment Corpn. of India Ltd. In view of these materials on record and more particularly in the light of catalogue of the machinery, the conclusion that can be drawn is that the machinery in question is primarily and solely meant for manufacturing paper makers felt and not jute products as has been envisaged in the notification in question. The appellants are relying on the subsequent development i.e. after the date of shipment by which the Min. of Industry by their letter dated 26-7-90 has modified their industrial licence and permitted them to manufacture diversified jute products by utilizing Jute fibre/Jute Yarn within the existing licenced capacity of their industrial licence. The endorsement on the industrial licence is subsequent to the bill of lading dated 20-6-90. Therefore, the ld. Collector's finding on this issue cannot be faulted with.
10. The appellants have taken a stand that this machinery can also be utilized for manufacture of geo-textiles. In this context, they had relied on the research papers presented by a few scientists. In these research papers, it has been shown that jute felt can be utilized in the manufacture of geo-textiles. The appellants have claimed that their Research and Development wing has also been successful in manufacturing jute felt which could be utilized in the manufacture of geo-textiles. They have also produced their Product literature of geo-textiles which states that the appellant company has successfully undertaken filed trials with regard to the use of geo-textiles in almost all the important areas of Civil Engineering, Railways, Pavement overlays, dams, drains, canals, coastal protection. However, in this product literature produced by the appellant, there is no mention of use of jute felt. The ld. Collector has dealt with this issue and has held that the machinery is primarily designed and imported for manufacturing paper makers felt and their incidental activity cannot be a ground for grant of the benefit of the notification meant for jute products. We agree with these findings and confirm the same. Ld. SDR has brought to our notice that till date the appellants have not shown to us as to what extent the appellants have utilized jute fibre for manufacture of jute felt. They have also not in categorical terms stated to what extent the machinery has been put to such use. During the course of the arguments. ld. Consultant admitted that the jute felt manufactured from this machinery may not have been more than 5% of the clearances. This makes it also very clear that the machinery has been imported and utilized solely for manufacturing paper makers felt.
We have also noticed from the narration of the facts that the department has placed two evidence, i.e. certificates of B.K. Paper Mills and Ballarpur Industries Ltd. who have categorically stated that no jute base paper making felts were used by them. Therefore, it follows that the trade understanding is also that this machinery is for the purpose of manufacturing paper makers felt only and not for jute felt. Thus, the machinery is possibility for manufacturing some other item incidentally, that by itself, is no ground for granting the benefit; more particularly in the light of the present facts and circumstances of the case, in which there is a clear admission or record that this machinery has been imported for manufacturing paper makers felt. We also agree with the findings given by the ld. Collector with regard to the interpretation of the term "composite plant". As it is also very clear from the fact of the case that this machine which has been imported is not a composite felt making plant as per the appellant's own admission, but only a needle loom. Needle loom by itself cannot by any stretch of imagination be considered as a composite plant.
11. Ld. SDR relied on the ruling of this Tribunal rendered in the case of Collector of Central Excise v. Renewable Energy Systems Ltd. in Order No. C/ 140/93-B2, dated 26-10-93. In this cited case, the question was whether "Cold heat test equipment" design to function within a range of minus 80°C to plus 130°C can be given the benefit of the exemption under Notification 77/89-Cus., dated 1-3-89. The S. No. 33 of the said notification reads "Cold Chamber minus 30°C and below". The Adjudicating Authority had held that though the notification satisfied the test of functioning below minus 30°C, it also had got additional features for working up to plus 130°C. The authority had held that in taxing statute there is no scope for intendment and that exemption notifications are to be interpreted strictly without stretching the meaning of the words used therein. The Tribunal confirmed this finding on the basis of the ruling of Hon'ble Supreme Court in the case of CCE v. Fusebase Eltoto Ltd. [1993 (67) E.L.T. 30 (S.C.) = 1993 (48) ECR 2]. The Tribunal had also held that the ruling cited by the importer in the case of Collector of Customs v. Officer Photostat Printers as reported in 1991 (54) E.L.T. 142 was distinguishable. The Tribunal had also held that the ruling rendered in the case of Blue Star would not apply to the facts of the case. We are inclined to agree with view taken by the Tribunal as rendered in the case of M/s. Renewable Energy Systems Ltd. The reasoning given in Paras 10 to 12 of the majority order are noted herein below :
"10. It is a settled proposition of law that any expression in a taxing statute has to be understood in the sense of what the trading community understands it because it is that community which is to deal with the Customs Act and the Customs Tariff Act. In other words, in order to interpret any entries whether in the said Act or under the notification issued there under commercial parlance test has to be applied. The goods described in the notification which are (Cold Chamber minus 30°C and below. The very name of the imported goods is different from the goods described in the notification and no evidence has been placed on record by the respondents herein that 'Cold Heat Test Equipment' is also known as 'Cold Chamber' in commercial parlance, burden of which squarely lies on the respondents because it is they who are to avail of the benefit of an exemption notification.
10.1 The respondent's sole contention for entitlement to the benefit of Notification 77/89 is that their imported satisfy the functions expected of 'Cold Chamber minus 30°C and below' and therefore, they should be extended the benefit, even though their goods perform another function. It is again a settled proposition, as laid down by the Supreme in the case of Jain Engineering -1987 (32) E.L.T. 3 that merely because two articles have the same function, it does not mean that they are one and the same thing. In this connection Para 9 of the said Report is reproduced below :
"9. It has been held by the Appellate Tribunal and it is also the contention of the learned Additional Collector General that bushings and bearings are identical articles. It seems that the appellate Tribunal was influenced by the fact that functions of the bushings and bearings are the same. It may be that two articles have the same functions, but none the less, they are distinct and separate. As the functions of the bushings are the same as that of the bearings, sometimes bushings are also called bearings, as pointed out by the Appellate Tribunal. But when these two articles are known to the market by two different names, it is difficult to uphold the contention that they are same and identical, even though they perform the same functions. We, therefore, do not agree with the finding of the Appellate Tribunal and the Customs authorities that bushings and bearings are same and identical".
10.2 Ld. SDR in the course of arguing for the Revenue had also relied on another judgment of the Supreme Court in the case of CCE v. Fusebase Eltoto Ltd. - 1993 (48) ECR. 2 wherein it was held by the Apex Court that projection T.V. set is different from broadcast television receiver although both are capable of receiving television broadcast. In arriving at the aforesaid conclusion, it applied the commercial parlance test. In Para 7 the Apex Court observed that the Tribunal did not touch the question as to how the product called 'broadcast television receiver set' is identified by the class or section of people dealing with or using the product. That is the test to be followed when the relevant notification do not contain any definition of the products. Same test in my view is required to be applied in the present case. It has not been found by the lower appellate authority nor shown by the respondents herein that the 'Cold Heat Test Equipment' is known as 'Cold Chamber' to the persons dealing in using the said goods.
11. I am also inclined to agree with the ld. SDR Shri B.K. Singh for the Revenue that the cases relied upon by the lower authorities, namely (i) 1991 (54) E.L.T. 142 and (ii) 1990 (50) E.L.T. 186 are distinguishable from the facts and circumstances of the present case. He rightly points out that in the latter case imported goods were 'automatic film/paper processor as described in the invoice. The imported goods apart from fully satisfying the description of the exempted goods in the notification merely perform another function. There was no dispute regarding the commercial parlance of the goods in question. Similarly, in the earlier case of C.C. v. Blue Star Ltd. - 1990 (50) E.L.T. 186 it was clearly found by the authorities below that the imported goods were 'basically devised to carry out the Vickers hardness test of steels and metals and incidentally it carried out a small range of Brinell test and even that could not be considered as a standard test as the machine was not designed to cover the full range of hardness testing under the Brinell's method which goes upto 3999 kg. There is no finding nor can there be one that the imported goods are essentially and principally meant to carry out the function of the cold chamber and the function of extra testing which the imported goods carried out is only an incidental function.
11.1 I am, therefore, of the view that 50 E.L.T. 186 would not apply to the present case.
12. I, therefore, allow the appeal of the Revenue with consequential effect thereof."
12. In view of the conclusions arrived at by us, we confirm the reasoning given by the ld. Collector and order for dismissal of the importer's appeal. The revenue appeal is for imposing penalty under Section 111(m) of the Customs Act. ld. Collector has clearly given the finding that there is no mis-declaration in the present case. We are fully agreeable with the finding given on this issue and do not find any merits in the revenue's appeal. In the result both the appeals are dismissed.
13. [Concurring Order per : P.C. Jain, Member (T)]. - I have perused the order proposed by my learned brother, Shri S.L. Peeran, Judicial Member. Facts of the case and the pleas of both sides have been set out in detail by the learned brother. I would, therefore, not touch upon them again.
14. The short question that falls for consideration in this matter is whether Paper Maker's Felt Needle Punching Machine Type NL/18/II are covered by the expression at S. No. 19 of Notification 489/86-Cus., dated 18-12-86 as amended by Notification 283/89 reading as follows :-
"Composite Felt Making Plant including Coating/Garnetting/Needle Looms."
There is no dispute that in common parlance Needle Punching Machine is also called a Needle Loom.
15. The adjudicating authority on the basis of evidence on record has held that the Machine is primarily designed for making 'Paper Maker's Felt' in which jute fibre is not at all used. On that reasoning and on the basis of correspondence prior to change in Policy allowing Textile Industries other than Jute Industry to make use of jute in their products excepting manufacture of certain specified jute products such as hessian, sacking, jute twine and rope the adjudicating authority has found that the machine is used for making "jute felt".
16. I am of the view that whatever may have been the intention of the appellants in making the import of the subject machine, that cannot be guiding factor in determining its entitlement to Notification 489/86 (as amended) so long as on the date of import i.e. 27-8-90 or on the date of filing of the bill of entry the goods are covered by the said notification. Intention in my considered view cannot be a criterion for assessment of goods in a notification in the absence of any words to that effect in the said notification. There is no dispute that after the change in policy regarding use of jute fibre by other Textile Industries, the appellants herein fulfil the conditions that they are actual users (Industrial) engaged in the manufacture of jute products and they are also registered with the Jute Commissioner. Although, learned SDR, Shri B.K. Singh has tried to make some grounds that the appellants could not be said to be "engaged" in the manufacture of jute products in view of the word "engaged" used in past tense, I do not find much force in the said plea. The fact that they have been registered with the Jute Commissioner for manufacturing jute products, the appellants could be said to be actual user (Industrial) engaged in the manufacture of jute products. I also notice that this is not the ground taken by the adjudicating authority in denying the benefit of the said notification to the appellants.
17. Nevertheless, the question remains whether the imported machine is covered by the expression at S. No. 19 of the Schedule to Notification 489/86 extracted above.
18. It is one of the arguments of the learned Counsel for the appellants that the said Schedule to Notification 489/86 contains machines which are workable only with jute fibre and yet some of the machines are such which are workable with jute fibres as well as other fibres. He submits that machines at S. Nos. 12 to 21 in the Schedule are such mutli-fibre textile machines. He, therefore, submits that simply because the imported machine works with other fibres, it cannot be taken out of the purview of the said notification. While this argument, so far as it goes, is correct, yet the appellants have to show that the machine imported is normally used for jute fibre because it is apparent from the notification by virtue of the requirement of registration with the Jute Commissioner that all the machines should be capable of working with jute fibre in their normal use even though the machine may also be capable for working with other fibres. In other words, the normal use of the machine for entitlement to the benefit of notification 489/86 should be with jute fibre. I find that no such evidence has been brought on record by the appellants. They have brought on record a very general evidence that jute fibre is used in geo-textiles. But this evidence misses the mark. It does not say that geo-textiles are normally manufactured on the imported machines. It is a settled proposition that in order to avail the benefit of a notification burden lies on the assessee that he is within four corners of the notification. Therefore, in the absence of any proper evidence, I do not hold that the subject machine is normally used with jute fibre. On the other hand, there is a very categorical finding of the adjudicating authority that the design of the imported machine is for manufacturing Taper Maker's Felt' in which no jute fibre is at all used. The benefit of the notification, therefore, cannot be extended to the appellants.
19. Before parting, I would like to put on record my view regarding another ground on which the lower authority has denied the benefit. It is that S. No. 19 allows benefit to coating/gametting/needle looms only if it is imported along with Composite Felt Making Plant by use of the word 'including' in S. No. 19. This I feel is a wrong finding. It is a well settled proposition that the word 'including' is normally used to enlarge the scope of an earlier expression by including such things which may not normally get covered by the earlier expression. The word 'including' as submitted by the learned Counsel for the appellants cannot be equated with the word 'with'. The lower authority's finding, therefore, in my view is not correct on that point. If interpretation of the adjudicating authority is accepted, it will, in my view, lead to anamoly 'Needling' or 'Needle Punching' is an important process in manufacture of felts. If 'Composite Felt Making Plant' is permissible under S. No. 19, needle loom would ordinarily be included in the said plant. There would have been no need to show it separately under an inclusive clause. Further 'needle loom' would be unnecessarily duplicated-one in the 'Composite Felt Making Plant' and another separately.
20. However, in view of my earlier finding, benefit of Notification 489/86 cannot be extended to the appellants. Accordingly, I reject the appeal of the assessee.
21. In so far as the Revenue's appeal is concerned, I agree with the findings of my learned brother, Shri S.L. Peeran, Judicial Member. Therefore, that is also rejected.