Custom, Excise & Service Tax Tribunal
Jayesh Patel vs Commissioner Of Customs Nhava Sheva -I on 23 November, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
Customs Appeal No. 85993 of 2017
(Arising out of Order-in-Original No. 115/2016-17/CC/NS-I/JNCH dated
31.01.2017 passed by the Commissioner of Customs (NS-I), Nhava Sheva)
M/s JH-Welltec Machines (India) Pvt. Ltd. .... Appellant
Plot No. 410, Palki 1000 Sq. Yard, Kathwada GIDC No. 10,
Kathwada, Ahmedabad - 382024
Versus
Commissioner of Customs (NS-I), Nhava Sheva .... Respondent
JNCH, Nhava Sheva, Dist. Raigad, Maharashtra - 400707
WITH
Customs Appeal No. 85989 of 2017
(Arising out of Order-in-Original No. 115/2016-17/CC/NS-I/JNCH dated
31.01.2017 passed by the Commissioner of Customs (NS-I), Nhava Sheva)
Jayesh Patel .... Appellant
C/o JH-Welltech Machines (India) Pvt. Ltd.
Plot No. 410, Palki 1000 Sq. Yard, Kathwada GIDC No. 10,
Kathwada, Ahmedabad - 382024
Versus
Commissioner of Customs (NS-I), Nhava Sheva .... Respondent
JNCH, Nhava Sheva, Dist. Raigad, Maharashtra - 400707
AND
Customs Appeal No. 85990 of 2017
(Arising out of Order-in-Original No. 115/2016-17/CC/NS-I/JNCH dated
31.01.2017 passed by the Commissioner of Customs (NS-I), Nhava Sheva)
Hitendra Rameshchandra Nagadia .... Appellant
C/o JH-Welltech Machines (India) Pvt. Ltd.
Plot No. 410, Palki 1000 Sq. Yard, Kathwada GIDC No. 10,
Kathwada, Ahmedabad - 382024
Versus
Commissioner of Customs (NS-I), Nhava Sheva .... Respondent
JNCH, Nhava Sheva, Dist. Raigad, Maharashtra - 400707
AND
2 C/85989-85993/2017
Customs Appeal No. 85991 of 2017
(Arising out of Order-in-Original No. 115/2016-17/CC/NS-I/JNCH dated
31.01.2017 passed by the Commissioner of Customs (NS-I), Nhava Sheva)
Sanjay Sutariya .... Appellant
C/o JH-Welltech Machines (India) Pvt. Ltd.
Plot No. 410, Palki 1000 Sq. Yard, Kathwada GIDC No. 10,
Kathwada, Ahmedabad - 382024
Versus
Commissioner of Customs (NS-I), Nhava Sheva .... Respondent
JNCH, Nhava Sheva, Dist. Raigad, Maharashtra - 400707
AND
Customs Appeal No. 85992 of 2017
(Arising out of Order-in-Original No. 115/2016-17/CC/NS-I/JNCH dated
31.01.2017 passed by the Commissioner of Customs (NS-I), Nhava Sheva)
Sanjay Gupta .... Appellant
C/o JH-Welltech Machines (India) Pvt. Ltd.
Plot No. 410, Palki 1000 Sq. Yard, Kathwada GIDC No. 10,
Kathwada, Ahmedabad - 382024
Versus
Commissioner of Customs (NS-I), Nhava Sheva .... Respondent
JNCH, Nhava Sheva, Dist. Raigad, Maharashtra - 400707
Appearance:
Shri Gajendra Jain a/w Rajesh Ostwal & Saurabh Bhise, Advocates for the
Appellants
Shri Ashwini Kumar, Authorized Representative for the Respondent
CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/87165-87169/2023
Date of Hearing: 08.08.2023
Date of Decision: 23.11.2023
Per: S.K. Mohanty
Brief facts of the case, leading to these appeals, are summarized
herein below:
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1.1 The appellant M/s JH-Welltec Machines (India) P. Ltd., inter alia, is
engaged in the manufacture of Plastic Injection Moulded Machines
(PIMM) and is duly registered with the Central Excise department,
having jurisdiction over the factory of such manufacture of the excisable
goods. PIMM is a machine used for manufacturing wide variety of plastic
products like caps of plastic bottles, automobile parts etc., by injection
moulding process. For the purpose of manufacture/assembly of the
PIMM, the appellant had imported various parts from M/s Welltec
Machinery Ltd., China. The appellant and the overseas supplier are
related persons in terms of Rule 2(2) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 and
accordingly, the appellant got itself registered with the Special Valuation
Branch (SVB), New Custom House, Mumbai for the purpose of valuation
of the imported equipment/parts. The appellant had also claimed that it
had domestically procured certain parts and equipment for manufacture
of the complete PIMM and that it had discharged the Central Excise duty
liability on manufacture of such goods.
1.2 In the matter of import of all kinds of plastic processing or
injection moulding machines, an investigation was conducted by the
Designated Authority (DA) in the Department of Commerce. In the
preliminary findings, vide Notification No. 14/12/2008-DGAD, dated
10.02.2009, the DA had concluded that the subject goods had entered
the Indian market from the subject country at the prices less than the
normal value in the domestic market of the exporting country; that the
dumping margins of the subject goods imported from the subject
country were substantial and above de minimis; and that the domestic
industry had suffered material injury and the injury had been caused to
the domestic industry, both by volume and price effect of dumped
imports of the subject goods, originating in or exported from the subject
country. On the said findings, the DA had recommended for imposition
of provisional anti-dumping duty on all imports of the subject goods,
originating in or exported from China. Subsequently, based on detailed
investigation, the DA vide Notification dated 31.12.2009, issued from file
F. No. 14/12/2008-DGAD had recorded the final findings, in confirming
the preliminary findings recorded in the Notification No. 14/12/2008-
DGAD, dated 10.02.2009. Pursuant to such final findings, the Central
Government vide Notification No. 39/2010-Cus. dated 23.03.2010 had
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imposed the anti-dumping duty on 'plastic processing or injection
moulding machines', originating in, or exported from China PR. The levy
of anti-dumping duty as per the said notification was for a period of five
years from the date of imposition of the provisional anti-dumping duty
i.e., 12.05.2009.
1.3 In this case, the officers of Central Intelligence Unit (CIU), in the
Customs department had conducted an inquiry with regard to horizonal
plastic injection moulding machines imported by the appellant. They had
alleged that the appellant had imported such goods from M/s Welltec
Machinery Ltd., China in the guise of "parts and components" with the
sole intention to evade anti-dumping duty leviable as per notification
dated 12.05.2009, as amended by notification dated 23.10.2010. The
consignment covered under Bill of Entry No. 8161563 dated 09.10.2012
were seized by officers of CIU on 30.11.2012. Subsequently, during the
search operation at the appellant's factory, the said officers found that in
respect of past consignments, the appellant had evaded payment of
anti-dumping duty. During the course of investigation, the Department
recorded statements from various persons with regard to the issue of
importation of the subject goods. On the basis of investigation, the
department had concluded that the appellant in connivance with its
related foreign supplier had adopted various modus operandi and
imported assemblies/sub-assemblies of PIMM of capacity between 90
Ton to 750 Ton in SKD/CKD condition by willfully mis-declaring and mis-
classifying the imported goods as parts, components and spare parts
with the intention of evading ADD amounting to Rs.19,68,98,069/-. It
has further been observed by the department that the appellant had
planned the evasion meticulously in collusion with other directors of the
importing firm and representative of the related foreign supplier to
suppress the actual description of the goods, by mis-declaring them as
parts and components to import all essential assemblies/sub-assemblies
of PIMM manufactured by the related foreign supplier in CKD/SKD
condition to evade payment of ADD. On the basis of investigation, the
department had proposed for rejection of classification of imported parts
of PIMM under CTI 8477 9000 /7318 1100 and classified the same under
CTI 8477 1000 for the purpose of confirming the demand of ADD under
Section 28(4) of the Customs Act, 1962. For this purpose, the
department had applied the provisions of Rule 2(a) of the General Rules
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for the Interpretation (GIR) to the First Schedule to Import Tariff to hold
that items imported should be classified as complete PIMM. Further, the
department had also entertained the belief that the appellants herein,
are exposed to the penal consequences provided under the statute.
1.4 On the above backdrop of the issue, the department had issued
the show cause notice dated 28.07.2015 to the appellants, calling upon
them to show cause as to why the subject goods seized under the
provisions of Section 110 ibid, and subsequently released provisionally,
shall not be confiscated under Section 111(d) and 111(m) ibid; the
declared classification of the imported goods under CTI 8477 9000 /
7318 1100 shall not be rejected and to be classified under CTI 8477
1000 for the purpose of assessment and levy of ADD amounting to
Rs.19,68,98,069/- as per notification dated 12.04.2009 and 23.03.2010
(supra); interest on the ADD payable under the disputed Bills of Entry
shall not be charged under Section 28AA ibid; and penalty shall not be
imposed on the appellants under Section 112(a) and 114A ibid.
1.5 The matter arising out of the SCN dated 28.07.2015 was
adjudicated vide Order-in-Original No. 115/2016-17/CC/NS-I/JNCH
dated 31.01.2017 by the Principal Commissioner of Customs, NS-I,
JNCH, Nhava Sheva (for short, referred to as the 'impugned order'),
wherein the learned adjudicating authority has confirmed the proposals
made in the SCN. The following adjudged demands were confirmed on
the appellants:
Appeal No. & Period ADD demand Penalty imposed
Name of appellant (in Rs.) (in Rs.)
C/85993/2017 19,68,98,069
JH-Welltec Machines 19,68,98,069 under Section
(India) Pvt. Ltd. 114A
C/85989/2017 - 10,00,000 under
Jayeshkumar Patel 30.9.2011 Section 112(a)
to
C/85990/2017 - 10,00,000 under
9.10.2012
Hitendra Nagadia Section 112(a)
C/85991/2017 - 10,00,000 under
Sanjay Sutariya Section 112(a)
C/85992/2017 - 10,00,000 under
Sanjay Gupta Section 112(a)
1.6 Feeling aggrieved with the impugned order, the appellants have
filed these appeals before the Tribunal.
6 C/85989-85993/2017
2.1 Shri Gajendra Jain, learned Advocate appearing for the appellants
has submitted that the parts of PIMM imported by the appellants are
classifiable on their own merits, individually and independently by virtue
of Section Note 2 to Section XVI of the Customs Tariff Act, 1975 read
with Rule 1 of GIR. Thus, he submitted that the provisions of Rule 2(a)
of GIR shall not be applicable for determination of the ADD liability on
the subject goods. He further submitted that the said rule has the
application only to assembly operations and will not apply in a case,
where extensive manufacturing activities are involved. Hence, he
submitted that the components imported by the appellants cannot be
classified as finished goods imported in un-assembled condition. In this
context, he had relied upon the judgement of the Hon'ble Supreme
Court, in the case of Chief Commissioner Vs. ACER India - 2004 (172)
E.L.T. 289 (S.C.) and Shriram Vinyl & Chemicals Industries Vs.
Commissioner of Customs - 2001 (129) E.L.T. 278 (S.C.); Order of the
Tribunal in the case of LG Electronics India P Ltd., Vs. Commissioner of
Customs- 2022(8) TMI 873 - CESTAT Allahabad, Ellora Time Ltd. Vs.
Commissioner of Customs, Kandla - 2005 (188) E.L.T. (491) (Tri.).
2.2 Learned Advocate also submitted that even if, Rule 2(a) ibid is
applicable for proceedings under Section 9A of the Customs Tariff Act,
1975, but the notification dated 23.03.2010 shall not be applicable
inasmuch as import of PIMM in CKD/SKD condition was not a stipulated
condition therein for levy of ADD. To support such stand, learned
Advocate has relied upon the order passed by the Tribunal in the case of
Anchor Daewoo Inds. Ltd. Vs. Commissioner of Customs, Kandla - 2007
(214) E.L.T. 230 (Tri. - Ahmd.), which was upheld by the Hon'ble
Supreme Court [2016 (331) E.L.T. A138 (S.C.)], in dismissing the Civil
Appeal Nos. 5999-6000 of 2007 filed by the Commissioner of Customs,
Kandla. Further, learned Advocate has also relied upon the judgements
delivered by the judicial forum in the case of Wipro Limited Vs.
Commissioner of Customs, Chennai - 2007 (217) E.L.T. 558 (Tri. -
Chennai); Philips India Ltd. Vs. Commissioner of Customs, Mumbai -
2004 (166) E.L.T. 49 (Tri. - Mumbai); Plaza Lamps and Tubes Ltd. Vs.
Commissioner of Customs - 2007 (209) E.L.T. 182 (Del.) and Delta
Electronics Vs. Commissioner of Cus. & C. Ex., Meerut - 2012 (283)
E.L.T. 68 (Tri. - Del), to state that notified goods alone should be
7 C/85989-85993/2017
subjected to levy of ADD and not the parts and equipments imported for
manufacture/assembly of such machine/ machinery.
2.3. Learned Advocate further submitted that the appellants had also
procured substantial parts from within the country for carrying out the
manufacturing activity in their factory premises. He has referred to the
item 'Base Frame', one of the important parts, to say that the same was
procured locally and that without such base frame, it is impossible to
conceive the idea of manufacture of the PIMM. To support such stand,
learned Advocate has referred to the certificate issued by the IIT
Professor and contended that without locally procured goods and
activities undertaken in India, it is not practically possible to conceive
the imported goods as constituting the PIMM. With regard to the opinion
furnished by the IIT Professor, learned Advocate submitted that such
opinion was given in the capacity of an expert in the field and the same
has not been challenged otherwise by the adjudicating authority. Thus,
he submitted that the opinion furnished by the Expert in the field must
be given due credence and should not be ignored, without proper
substantiation of the case. In this context, he had relied upon the
judgement of the Hon'ble Supreme Court in the case of Commissioner of
Customs, Mumbai Vs. Konkan Synthetic Fibres - 2012 (278) E.L.T. 37
(S.C.), BPL Pharmaceuticals Ltd. Vs. Commissioner of Customs 1995
(77) E.L.T. 485 (S.C.) and the order of this Tribunal passed in the case
of Diamond Cements Ltd, Vs. Commissioner of Central Excise - 2012
(283) E.L.T. 226 (Tri.), to state and submit that opinion of an expert in
the field of trade, who deals in subject goods, should not be ignored and
should be given due importance.
2.4 As regards the certificate of Chartered Engineer M/s Sai Siddhi
Associates, relied upon by the Revenue for confirmation of the adjudged
demands, learned Advocate submitted that the said certificate cannot at
all be relied upon and that, if the said certificate is considered, then it
goes in appellants' favour, inasmuch as it has been specifically
confirmed therein that 'assemblies presently imported contribute to
approximately 25% to 30% of the respective complete unit' i.e., PIMM.
3. Shri Ashwin Kumar, learned Authorised Representative (AR)
appearing for the Revenue submitted that the adjudged demands
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confirmed in the impugned order are in conformity with the statutory
provisions. In this context, he submitted that the appellants had
imported complete PIMM by mis-declaring the same as parts, spare
parts, components, sub-assemblies and assemblies of complete
machine, with the malafide intention to evade payment of ADD, levied
under Sl. No.12 of the table appended to notification No.39/2002-Cus.
dated 23.03.2010. He further submitted that the levy of ADD is on PIMM
classifiable under CTI 8477 1000. He also submitted that the chartered
engineer M/s Sai Siddhi Associates had issued the certificate only in
respect of the consignment covered under the B/E No. 8161563 dated
19.12.2012. With regard to other consignments covered under separate
bills of entry, he submitted that since, the department upon proper
analysis, had confirmed that the same are assemblies/parts of the
PIMM, which are simply to be fitted with the help of nuts and bolts, the
appellants are liable to pay ADD in terms of the notifications issued by
the Designated Authority, considering the imported consignments as a
complete machine by itself. Learned AR has relied upon the
conversations made through e-mail and skype between the parties to
the contract and claimed that the base frame parts, controller, hydraulic
motors, valve hydraulic hose etc., were in fact imported by the
appellants for mere carrying out the activity of assembling the same
within the factory premises. Therefore, he submitted that since the vital
components were imported by the appellants, just for the purpose of
assembly of PIMM, it cannot be said that those vital items were sourced
by the appellant locally in order to complete the process of manufacture
of PIMM. To strengthen the case of Revenue, that the subject goods
imported by the appellants are liable for payment of ADD, the learned
AR has relied upon the Order of this Tribunal in the case of Ankit
Asthana Vs. Commissioner of Customs (Import), Nhava Sheva - 2015
(327) E.L.T. 162 (Tri. - Mumbai). Thus, he contended that confirmation
of the adjudged demands against the appellants are sustainable under
the law.
4. Heard Shri Gajendra Jain, learned Advocate, Shri Ashwin Kumar,
learned AR and examined the case records, including the written notes
submitted by both sides.
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5. Learned Advocate appearing for the appellants prayed for abating
the appeal being No. C/85991/2017 on the ground that the appellant
Sanjay Kumar M Sutariya had expired on 25.02.2023. We have also
perused the death certificate dated 16.03.2023 issued by Amdavad
Municipal Corporation, certifying that Sanjay Kumar Mithabhai Sutariya
died on 25.02.2023 and the case was registered vide Sl. No.190 in the
record of the Corporation. Since, the deceased appellant is no more in
existence, the appeal filed by him should abate in terms of Rule 22 of
the CESTAT (Procedure) Rules, 1982. Accordingly, the appeal filed by
him abated.
6.1 The Directorate General of Anti-Dumping and Allied Duties, in the
Ministry of Commerce & Industry, Government of India had initiated
anti-dumping investigation, concerning import of 'Plastic processing
machinery', originating from China PR. The said proceedings were
initiated pursuant to the application filed by M/s L&T Demag Plastic
Machinery Ltd., Chennai. In the Notification dated 08.07.2008, issued
from file F. No. 14/12/2008-DGAD, the authorities had initiated
investigation proceedings, concerning the products i.e., "all kinds of
plastic processing or injection moulding machines, also known as
injection presses, having clamping force not less than 40 tonnes, used
for processing or moulding of plastic materials". On primary round of
investigation into the matter, the Designated Authority had submitted its
preliminary findings by Notification No.14/12/2008-DGAD dated
10.02.2009, with the conclusion that (a) the subject goods had entered
the Indian market from the subject country at prices less than their
normal values in the domestic market of the exporting country; (b) the
dumping margins of the subject goods imported from the subject
country were substantial and above de minimis; (c) the domestic
industry had suffered material injury and the injury had been caused to
the domestic industry, both by volume and price effect of dumped
imports of the subject goods, originating in or exported from, the
subject country. On the basis of such preliminary findings, the
Designated Authority had recommended for imposition of provisional
anti-dumping duty on all imports of the subject goods, originating in or
exported from, the subject country, i.e., China PR.
10 C/85989-85993/2017
6.2 On the basis of such recommendation (supra), the Central
Government, in exercise of the powers conferred by sub-section (2) of
Section 9A of the Customs Tariff Act, 1975, read with the Rules 13 and
20 of the Customs Tariff (Identification, Assessment and Collection of
Anti-Dumping Duty on Dumped Articles and for Determination of Injury)
Rules, 1995, had issued the Notification No.47/2009-Customs dated
12.05.2009, in imposing an anti-dumping duty @ of 223% of the C.I.F.
value of imports of the subject goods. Such imposition of ADD was on
provisional basis. Subsequently, on detailed investigation into the
matter, the Designated Authority had issued the notification dated
31.12.2009 (from file F. No.14/12/2008-DGAD), in recording his final
findings. Vide the said notification, the Designated Authority had
recommended for imposition of definitive anti-dumping duty on the
subject goods, imported from China PR. Pursuant to such notification,
the Central Government vide Notification No.39/2010-Cus. dated
23.03.2010 had finally imposed the anti-dumping duty.
7. On conjoint reading of the notifications issued by the authorities in
both the Ministries i.e., Ministry of Commerce & Industry and the
Ministry of Finance, it makes the position clear that the authorities had
intended to levy anti-dumping duty on the plastic processing or injection
molding machines originating in, or exported from China PR. In other
words, when such machine is imported in 'as it is condition' or 'in
CKD/SKD condition' (without any further value addition thereto), then
the same are liable for payment of anti-dumping duty. The appellants
herein, had claimed that they had manufactured the PIMM (an excisable
commodity), out of the imported and locally procured parts and
components and that on such manufacturing activity, they had
discharged appropriate Central Excise duty liability. The details of the
imported/indigenously procured goods, as submitted by the appellants
in the tabular form, are extracted herein below:
S. Imported part S.
Local part description
No. description No.
Mould platen, tie bar with
I001 L001 Base frame
lock nuts and toggle links
Lubrication hose and Programmable Logic
I002 L002
Fittings Controller (PLC)
Mould adjustment motor
I003 L003 Hydraulic valves
and chain
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S. Imported part S.
Local part description
No. description No.
I004 Screw & barrel set L004 Hose pipe
I005 Heater band L005 Linear transducer
I006 Servo systems L006 Hydro motor
Hydraulic safety valve back
I007 L007 Seamless pipe
pressure adjustment valve
Electric cabinet with all
I008 L008 Hydraulic fittings
Wirings
I009 Controller cabinet L009 Aluminum checker sheet
Limit switches and proximity
I010 L010 Paint materials
switches
Guard cover and safety
I011 L011 Electrical panel & parts
Doors
I012 Hydraulic manifold L012 Machine oil & grease
I013 Pressure transducer L013 Allen bolts & hardware
I014 Oil cooler and filter L014 Tools
L015 Hardware items
Lubrication pump &
L016
fittings
L017 Acrylic sheet
8.1 During the course of inspection of the imported goods covered
under the B/E No. 8161563 dated 09.10.2012, the Customs Department
had engaged the Chartered Engineer M/s Sai Siddhi Associates, who on
inspection of the goods, vide certificate dated 09.11.2012 had confirmed
that the goods are assemblies for injection molding machines and not
parts as such, as declared in the import documents. Further, vide
paragraph 3.1 in the said certificate, the Chartered Engineer had
commented on the subject goods imported by the appellants, as under:
"We also confirm that even if all the above tabulated Assemblies are
assembled altogether, they do not form either of the complete injection
moulding machine. Rather we on our past experience on similar type of
goods opine that the Assemblies presently imported contribute to
approximately 25% to 30% of respective the complete units."
(emphasis supplied)
8.2 Further, to inspect the goods and for confirmation of the fact as to
whether, the import component thereof should alone be considered as
the complete PIMM or otherwise, the appellant had engaged Shri K.P.
Karunakaran, Institute Chair - Professor of Mechanical Engineering, in
the Indian Institute of Technology, Bombay. Upon in-depth study of the
process, the following technical opinion dated 02.08.2016 was furnished
by the said expert Professor:-
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"To Whomsoever It May Concern
Technical Opinion on Plastic Injection Molding Machines (PIMMs)
After almost a decade of industrial experience in Hindustan
Aeronautics Limited since 1984 specializing in the areas of CNC
technology and sheet metal manufacture, I took up teaching and
research career in IIT Bombay in 1994. I am presently an Institute
Chair Professor in the Department of Mechanical Engineering. My areas
of interest are CNC Technology, Manufacturing Automation, 3D
Printing, Computer Graphics and Innovating Product Development.
Application of 3D printing to produce injection molds with conformal
cooling channels is one of my specializations.
I visited JH Welltech Machines (India) Pvt. Ltd., Ahmedabad, along
with a research scholar on March 23, 2016 (Wednesday). We studied
the Plastic Injection Molding Machines (PIMMs) being manufactured in
their premises. We also visited a nearby factory where it was in use
and witnessed its operations.
JH Welltech imports certain parts like clamping unit, injection unit,
servo drive, etc. They also domestically procure vital parts like
machine base frame, PLC, hydraulic valves etc. In our opinion, it is not
possible to conclude that the imported goods per se would constitute
complete PIMM since without domestically procured parts and
components, the imported goods cannot form a machine by any
stretch of imagination. A detailed report is enclosed as Annexure-I to
justify our opinion."
(emphasis supplied)
Further, Shri K.P.Karunakaran, in his technical opinion (supra) had
also discussed about design, manufacture of PIMM and also its important
sub-systems such as base frame, clamping unit, heating system,
hydraulic system, PLC system etc., in forming the part of or participation
in the manufacture of final product i.e., PIMM. Upon detailed study of
the function of various machines, the said Professor in his opinion dated
02.08.2016, had concluded as follows:
"In our view, the significance of the domestically procured parts & the
activities undertaken by JH Welltech in their premises cannot be
ignored while judging the emergence of the complete PIMM. The
contributions of the indigenous parts of the PIMM manufactured in
India are as vital as the imported ones. The activities in India are also
substantial. Furthermore, there are continuous efforts in the company
to indigenize more and more parts like electrical cabinet, tie bars,
cylinders etc. While PIMMs are very important machine tools in view of
the ever increasing use of plastic parts, there are very few players
today.
13 C/85989-85993/2017
In our opinion, JH Welltech do not simply assemble the imported parts
and make the complete PIMM; they use several vital indigenous parts
for making it. In our opinion, it is not possible to conclude that the
imported parts by themselves constitute a complete PIMM. In other
words, without the locally procured goods and the activities undertaken
in India, it is impossible to conclude that the imported goods per se
can be called as a complete PIMM."
(emphasis supplied)
8.3 The appellant had also engaged another Chartered Engineer M/s
A.G. Associates to study the process of manufacture of PIMM and the
constituent parts used for manufacture of the same. Upon detailed study
of the manufacturing process and on consideration of the technical
parameters, the said Chartered Engineer vide its certificate 10.05.2016,
had confirmed that "an injection molding machine comprises of
thousands of small and big parts and components of which the major
are imported by the manufacturer. However, there are also some major
and minor parts and components which are being locally purchased by
the manufacturer. ... Of the goods locally purchased the most crucial
component / assembly is the base frame, which plays a vital role in the
assembly/manufacturing of any particular injection molding machine."
8.4. Furthermore, the financial aspects of the appellants' company
were also verified by M/s Avtar & Bhavesh, Chartered Accountants, who
vide certificate dated 25.01.2016 had provided the details of cost of
machine manufactured by using both domestic/imported parts. The
certificate together with the cost sheet (both value and quantity wise)
attached thereto, are extracted herein below:
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15 C/85989-85993/2017
9. On careful reading of the contents in the certificates dated
09.11.2012, 10.05.2016 and 02.08.2016 (referred supra) issued by the
Chartered Engineers and the certificate dated 25.01.2016 issued by the
Chartered Accountants (supra), the factual position is amply clear that
the appellant had imported certain components of the PIMM from
outside the country and indigenously procured some of the vital
components for manufacture of the resultant final product i.e., PIMM.
Further, the annexure to the certificate issued by the Chartered
Accountant, as above, had also reflected that the indigenously procured
components, both in terms of value and quantity wise, were also
commensurate with the quantity reflected in the certificate furnished by
M/s Sai Siddhi Associates, Chartered Engineers engaged by the
Revenue. However, on perusal of the impugned order, we find that
though the above referred certificates were produced by the appellants
before the adjudicating authority, but the same were completely
brushed aside and no findings were recorded therein, countering the
expert opinion furnished by the authorities in the field. In this context,
we find support from the judgement relied upon by the learned Advocate
for the appellants in the case of Konkan Synthetic Fibre (supra), wherein
the Hon'ble Supreme Court had held that the opinion of the expert in the
field of trade who deals in the subject goods, should not be ignored,
rather the same should be given due importance, while dealing with
fiscal or taxation laws.
10. Even assuming that the case of the appellant falls under the
purview of levy of ADD, then in that case, the background of levy and
imposition of ADD has to be looked into in terms of various
notification(s) issued by the Ministry of Commerce & Industry.
The whole scheme envisaged under Section 9A ibid, read with Customs
Tariff (Identification, Assessment & Collection of Anti-Dumping Duty on
Dumped Articles and for Determination of Injury) Rules, 1995, is for
consideration of a particular article only, which is the subject matter of
investigation pursuant to the complaint lodged by the domestic industry.
The whole process of determining "domestic industry", "margin of
dumping", "export price", "normal value", "injury", initiation,
investigation, etc. is in relation to a particular article liable for Anti-
dumping Duty. The Designated Authority identified PIMM alone as an
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article liable for Anti-dumping Duty. The Designated Authority did not
identify "PIMM in SKD condition" or "parts and components of PIMM" as
an article liable for Anti-dumping Duty, which is evident from the fact
that the inquiry was conducted, based on the representation of the
domestic industry only in context with complete plastic processing or
injection molding machines (PIMM) and not on any other article.
11.1 In context with the issue of levy of ADD, which is identical to the
issue for legal interpretation, the co-ordinate Bench of the Tribunal in
the case of Anchor Daewoo Industries Ltd. (supra), had dealt with the
notification No.139/2002-Customs and held that the levy of ADD was
only on the compact fluorescent lamps (CFL) and not on parts thereof.
The relevant paragraphs in the said order are extracted herein below:
"8. We find that the issue of whether the parts of CFL would in itself be liable
for imposition of anti-dumping duty was a issue between two ministries of Govt.
of India. The Office Memorandum No. 162/2006-DGAD, dated 1-5-06 as issued
by DGAD is as under:
"No. 162/2006-DGAD
Government of India
Ministry of Commerce and Industry
Department of Commerce
Directorate General of Anti Dumping and Allied Duties
Room N. 260-A, Udyog Bhawan,
New Delhi
Dated the 1st May, 2006
OFFICE MEMORANDUM
Sub. : Parts of CFL imported under HS code 98539.90 being classified under
8539.31 ready to use CFL - regarding.
Please refer to your Office Memorandum No. 354/205/2001-TRU (Part I)
dated 20th April, 2006, forwarding copy of representation dated 4th April, 2006
of M/s. Khaitan Electricals Ltd., whereby clarification has been sought on the
scope of the product CFL imported from China PR and covered under Anti-
Dumping Investigation conducted by the Designated Authority. In this regard, it
is clarified that :
(a) Anti-dumping duties were recommended/imposed on the following two types
of CFLs:
(i) Complete, ready to use compact fluorescent lamps wherein choke
is integrated within the lamp.
(ii) Complete, ready to use compact fluorescent lamps wherein choke
is external.
(b) Anti-dumping duties were not recommended on parts/components of CFL.
(c) "CFL with choke" is complete ready to use compact fluorescent lamps
wherein choke is an internal part.
(d) CFL without choke as defined in the final findings is complete ready to use
compact fluorescent lamps wherein choke would be external part.
2. This issues with the approval of the Designated Authority.
17 C/85989-85993/2017
Sd/-
(Rajesh Jain)
Jt. Director (Cost)
Tele : 23081732
Fax : 23083418
Shri J. Sahay, Technical Officer (TRU)
Ministry of Finance
Department of Revenue, Tax Research
Unit, North Block,
New Delhi."
(Emphasis provided)
9. It can be noticed from the above reproduced office memorandum, the
authority that recommends imposition of definitive anti-dumping duty, have
clearly indicated in the above memoranda that (a)(i), (ii) that the anti-dumping
duty were recommended on ready to use compact fluorescent lamp, whether
chokes are integrated within the lamp or whether the choke is external. It is to
be understood that the authority which recommends anti-dumping duty has
clearly indicated that the anti-dumping duty has to be imposed only on ready to
use CFL. It is not brought on record by the Revenue in this case that the goods
imported by the appellant and which were sought to be cleared are "ready to
use" compact fluorescent lamps. In the absence of any evidence to suggest that
the imported goods were ready to use CFL, we have hold that imported goods
are parts of CFL and they are not liable for imposition of anti-dumping duty as
per the office memorandum (as reproduced above)."
11.2 We find that Civil Appeal being Nos.5999-6000 of 2007 filed by the
Revenue in the case of Anchor Daewoo Industries Ltd. (supra), was
dismissed by the Hon'ble Supreme Court (supra). Thus, the law is amply
clear that the product under consideration for levy/imposition of ADD
should confine only to the product, on which investigation was initiated
by the Designated Authority under the Ministry of Commerce & Industry
and not on any other product. In the present case, since the product in
question under investigation was confined to 'plastic processing or
injection molding machines', the action on the part of the Customs
department to consider some other product to fall within the ambit and
scope of the product under investigation cannot hold good, having lack
of authority conferred under the statute. Therefore, in our considered
view, ADD shall not be levied on the goods imported by the appellants
on this ground also.
12.1 The provisions for levy of Customs duties are contained in Section
12 of the Customs Act, 1962. It has been mandated that duties of
customs shall be levied at the rates as specified under the Customs
Tariff Act, 1975 (for short, referred to as 'the Act of 1975'). On
importation of the disputed goods, the appellants had filed the Bills of
Entry classifying the imported goods under different customs tariff items
(CTI), as per Chapters 73, 84 and 85 provided under the Act of 1975.
The B/Es filed by the appellant were finally assessed by the Customs
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department at the port of import, accepting the declaration furnished by
the appellant. The provisions regarding levy of ADD on the dumped
articles are contained in Section 9A of the Act of 1975. Since, levy under
Section 9A ibid, is confined only to the dumped articles and is not a
general levy in respect of the imported goods as provided under Section
12 ibid, the notifications issued for the purpose of levy of ADD have to
be minutely studied. Since, the goods in question imported by the
appellants were not the complete PIMM by itself, and not brought under
the CKD/SKD condition, the same in our considered opinion, cannot be
subjected to levy of ADD and should be outside the scope and purview
of section 9A ibid. In other words, the authorities functioning under the
Act 1975, have to read the notification(s) in the proper perspective and
the same cannot be interpreted in a different way to bring something
else within their ambit for levy and collection of ADD. With regard to
levy of ADD on articles, the law is well settled that the provisions of
Section 9A read with Rule 2(a) of General Rules for Interpretation (GIR)
are applicable to the 'product under consideration' for levy of ADD by
the competent statutory authority.
12.2 The Act of 1975 provides the General Rules for the Interpretation
(GIR) of the First Schedule, concerning the import tariff. Rule 1 of the
GIR states that "the titles of Sections, Chapters and Sub-Chapters are
provided for ease of reference only; for legal purposes, classification
shall be determined according to the terms of the headings and any
relative Section or Chapter Notes and, provided such headings or Notes
do not otherwise require, according to the following provisions", which
are contained in subsequent rules viz., Rule 2 to Rule 6. On reading of
Rule 1 (supra), it transpires that the classification of imported goods
shall be determined with reference to the heading, section notes and
chapter notes. Thus, when the classification of imported item is possible
and determinable with reference to heading, section notes and chapter
notes, then recourse to Rule 2(a) of GIR cannot be resorted to.
12.3 Now coming to the provision of Rule 2(a) of GIR to Act of 1975, it
has been provided as under:
"Any reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished, provided that, as
presented, the incomplete or unfinished article has the essential
character of the complete or finished article. It shall also be taken to
include a reference to that article complete or finished (or falling to be
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classified as complete or finished by virtue of this rule), presented
unassembled or disassembled."
Reading of Rule 2(a) of GIR makes the position clear that the said
rule does not enact a special rule for classification, but only recognizes
the existing practice in trading of goods in CKD/SKD condition. For
example, a ceiling fan is sold in CKD condition only. Similarly, ready-to-
assemble or do-it-yourself, furniture items or bi-cycle are sold in CKD
condition. In those cases, when the goods are imported as CKD kit,
then they are classified as fan or furniture or bi-cycle and not as parts.
The articles envisioned under the Rule 2(a) of GIR are (i) incomplete
article possessing essential character of the complete or finished article;
(ii) unfinished article possessing essential character of the complete or
finished article; (iii) complete or finished article, in unassembled
condition; and (iv) complete or finished article, in disassembled
condition.
12.4 According to the department, the finished goods imported by the
appellant were in un-assembled condition. The phrase "presented
unassembled/disassembled" has been explained in the HSN Explanatory
Notes as under:
"(V) The second part of Rule 2(a) provides that complete or finished
articles presented unassembled or disassembled are to be classified in
the same heading as the assembled article. When goods are so
presented, it is usually for reasons such as requirements or convenience
of packing, handling or transport.
....
(VII) For the purpose of this Rule, `articles presented unassembled or disassembled' means articles the components of which are to be assembled either by means of fixing devices (screws, nuts, bolt, etc.) or by riveting or welding, for example, provided only assembly operations are involved.
No account is to be taken in that regard of the complexity of the assembly method. However, the components shall not be subjected to any further working operation for completion into the finished state.
Unassembled components of an article which are in excess of the number required for that article when complete are to be classified separately."
[Emphasis Supplied] 12.5 In addition to the above explanation, it has further been contemplated in the HSN Explanatory notes to Rule 2(a) of the GIR that the following aspects should also be considered for classifying the components as unassembled article:
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a) the article has been imported in unassembled condition for the convenience of handling, transportation and packing;
b) components imported should not undergo any further processing or working thereon;
c) the assembly operation is done either through fixing devices or by riveting or welding.
12.6 In the case in hand, the imported goods were not presented by the appellant in un-assembled condition as alleged by the department for the purposes of convenience of packing or handling or transportation. Rather, the post importation activities do not merely involve assembly of the imported goods, but involved procurement of the essential components/parts for ultimate manufacture of PIMM in India, the facts of which have also been endorsed by the Chartered Engineers in their respective certificates (referred supra). The process involved for completion of the manufactured goods since, have taken place post importation of the goods in question, in our considered view, the provisions of Rule 2(a) of GIR shall not be applicable for change in classification of the imported goods and to bring such goods under the purview of Rule 9A ibid, for the purpose of levy of ADD thereon.
13. In support of the findings that appellants had imported the complete PIMM, the impugned order has mainly relied upon the e-mail correspondences and skype conversations made between the appellants and the representatives of the overseas supplier/entities. We have gone through such relied upon documents and found that the subject matter of discussions therein was principally confined to the area of development of manufacturing facility of the product in India etc. Further, we find that nowhere in such retrieved documents/records, there is any whisper regarding importation of the complete PIMM machine. Rather, it transpires from such documentation that the appellants had not imported the complete machine and the items imported are only 'in part'. Furthermore, the statements relied upon in the impugned order are also not specific with regard to supply of the complete PIMM machine by the overseas supplier. Thus, we are of the view that blind reliance cannot be placed on such documents to conclude that the appellants had imported the complete machine, in order to fall within the purview of Rule 9A ibid read with the notifications issued by 21 C/85989-85993/2017 the Government of India in the Ministry of Commerce & Industry and the Ministry of Finance for the purpose of levy of ADD.
14. On the basis of the analysis made herein above, we conclude that the appellants herein had not imported the complete PIMM in order to fall within the purview of the notification(s) referred supra for levy of ADD. In this case, admittedly since the PIMM, complete in all respects was manufactured in India by using the domestically procured goods also, such imported equipment, in our considered view, should not be subjected to levy of ADD. Therefore, the adjudged demands confirmed in the impugned order cannot be sustained for judicial scrutiny. Further, it is not the case of Revenue that the appellants did not pay central excise duty on the PIMM manufactured by them in their factory located in Ahmedabad. Since, manufacturing activity undertaken by the appellants and payment of Central Excise duty on such activity was acknowledged and not disputed by the jurisdictional Central Excise authorities, the same cannot be questioned by the Customs department without any clinching evidence that such machine in question was imported into India as such or in un-assembled condition, and no further activities were undertaken thereto to complete the process of manufacture and installation etc.
15. In view of the foregoing discussions and analysis, we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellants. Therefore, by setting aside the impugned order, the appeals (excepting Appeal No. C/85991/2017) are allowed in favour of the appellants. Appeal No. C/85991/2017 abates in view of the discussions made in paragraph No.5 above.
(Order pronounced in open court on 23.11.2023 ) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) sm