Custom, Excise & Service Tax Tribunal
Socomec Innovative Power Solutions Pvt ... vs Chennai(Air Port & Cargo) on 15 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
CUSTOMS APPEAL No.41392 of 2016
(Arising out of Order-in-Appeal C. Cus No.468-547/2013 dated 28.03.2013 passed
by Commissioner of Customs (Appeals), Chennai 600 001)
M/s. Socomec Innovative Power Solutions Pvt Ltd ..Appellant
(formerly known as Socomec UPS India Pvt. Ltd.)
B1,2nd Floor, Thiru.Vi.Ka Industrial Estate,
Guindy, Chennai - 600 032.
VERSUS
The Commissioner of Customs, ...Respondent
Custom House, 60, Rajaji Salai Chennai 600 001.
APPEARANCE :
Ms. M.B. Divya, Advocate, for the Appellant Shri R. Rajaraman, Authorised Representative for the Respondent CORAM :
HON'BLE MS. SULEKHA BEEVI.C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No._40419 / 2024 DATE OF HEARING : 06.03.2024 DATE OF DECISION : 15.04.2024 Per Ms. Sulekha Beevi. C.S The appellant had filed 80 Bills of Entry during Jan,2012 to Jan, 2013 for clearance of goods declared as Uninterrupted Power Supply (UPS) / Static converters falling under Customs Tariff Heading 8504 40 10. The appellant claimed exemption from Basic Customs Duty under Notification No.25/2005-Cus dated 01.03.2005 at serial number 4. The said notification at serial number 4 exempts Static converters for automatic data processing machines and units thereof, 2 Customs Appeal No.41392 of 2016 and telecommunication apparatus from whole of the duty of Customs leviable. The relevant part of the Notification is as under: -
S.No. Heading, Sub - Description of goods
heading or Tariff item
4
[4 8504 40 Static converters for automatic data
processing machines and units
thereof, and telecommunication
apparatus, other than static
converters for cellular mobile
phones]
2. On examination of the goods it came to notice that the goods are also capable of being used in other places especially as inverters and the applicability of the notification was doubted by the department. The goods were thus assessed provisionally in terms of Section 18 of the Customs Act 1962. Later the appellant was issued a query to justify the claim. After due process of law, the original authority held the goods to be classified under 8504 40 90 and also held that the benefit of Notification No. 25/2005 dated 01.03.2005 at Serial No.4 is not eligible to the appellant as the imported goods can be used for various purposes and are not for use only for automatic data processing machine and telecommunication apparatus. Against such order, the appellant filed appeal before Commissioner (Appeals) and vide common impugned order the Commissioner (Appeals) upheld the order passed by the adjudicating authority. Hence, this appeal.
3. The Ld. Counsel Shri Raghavan Ramabadran appeared and argued for the appellant. The arguments are summarized as under: 3.1 The Appellant is inter alia engaged in the manufacture of electric switchgear, industrial ups & smart energy meter and has its manufacturing unit and office located at Mumbai and Chennai. In the 3 Customs Appeal No.41392 of 2016 present case, the Appellant had imported Uninterrupted Power Supply systems ('subject goods') and had classified the same under CTI 8504 40 90 as 'other static converters'. 3.2 The subject goods provide constant supply of power without interruption and are known as Online UPS systems. These subject goods are capable of use with ADP machines such as computer systems, servers etc. and are designed to supply power continuously in a manner so as to ensure constant supply of power to the ADP machine. During the relevant period, the Appellant imported 1 Unit of the UPS System at Rs 699,691.47/- vide Bill of Entry No. 5709384 dated 11.01.2012.
3.3 The fact that the subject goods were Online UPS is also evident from a perusal of the relevant portions of the International Standard, viz., IEC 62040-Part 3. All the UPS Systems imported by the Appellant are in compliance with the said Standard. Since the goods imported are designed and capable of use with ADP machines, the Appellant availed benefit under S. No. 4 of Notification No. 25/2005 - Cus. dated 01.03.2005 ('exemption notification') which provided for Nil rate of BCD.
3.4 However, the department was of the view that the subject goods are not eligible to benefit of concessional rate of duty under the exemption notification and denied the benefit and passed Order in Original No.18260/2012 dated 03.02.2012 ('OIO'). Vide the OIO, the Assistant Commissioner held that since the subject goods are used in variety of applications, the subject goods are not eligible for benefit under the exemption notification.4
Customs Appeal No.41392 of 2016 3.5 Aggrieved by the findings in the OIO, the Appellant approached the Hon'ble Madras High Court. The Hon'ble Madras High Court vide order dated 07.01.2013 in W.P. 4095 of 2012 dismissed the Writ Petition on the ground that the Appellant has alternate remedy.
3.6 The Appellant thereafter filed an appeal before the Commissioner of Customs (Appeals) ('Commissioner'). Further, during the interim period between July 2012 to January 2013, the Appellant imported the subject goods vide 79 Bills of Entry which were permitted clearance by payment of duty under protest. Therefore, the Appellant filed appeals against these 79 Bills of Entry as well.
3.7 The Commissioner (Appeals) vide Common Order-in-Appeal Nos. 468-547/2013 dated 28.03.2013 ('Impugned Order') dismissed the appeals filed by the Appellant. In the Impugned Order, the Commissioner by placing reliance on the Explanatory Notes to Budget Speech held that the intention of the Government is to exempt goods which are directly used in the IT industry, or such goods required for manufacture of the above goods subject to end- use condition. However, the Appellant being a trader cannot vouchsafe that the goods will be used only in IT industry. Further, the Commissioner (Appeals) observed that in case of ambiguity in notification, benefit must go to the State.
3.8 Aggrieved by the Impugned Order, the Appellant filed W.P. No. 18676 of 2013 before Hon'ble Madras High Court which was dismissed by the Ld. Single Judge on the ground on alternate remedy 5 Customs Appeal No.41392 of 2016 vide order dated 06.11.2014. Against this order, the Appellant also filed W.A. 425 of 2016 before the Division Bench of the Hon'ble Madras High Court which also dismissed the Writ Appeal vide order dated 06.02.2016 on the ground of alternative remedy. 3.9 Aggrieved by the findings of the Commissioner in the Impugned Order, the Appellant thereafter has filed the present appeal.
A The Appellant is entitled to the benefit of Nil rate of BCD under S. No. 4 of Notification No. 25/2005 - Cus. dated 01.03.2005.
The Appellant submits that they are eligible to avail the benefit of concessional rate of duty under the exemption notification and the Impugned Order has failed to appreciate the settled position of law for interpretation of the exemption notification. A.1 At this point, it is pertinent to note that during the relevant period the benefit under the exemption notification is available to the Static converters falling under CTSH 8504 40 for Automatic data processing machines and units thereof and telecommunication apparatus. Therefore, it becomes imperative to understand how to interpret the term "for ADP machines" as featuring in the exemption notification.
A.2 In this regard, the Appellant places reliance on the following decisions wherein it has been unequivocally settled that for use must be understood to mean capable of use and there can be no insistence that actual use of the goods must be proved.
a. Escorts Limited v. Collector of Customs, 1990 (47) E.L.T. 68 (Tribunal) 6 Customs Appeal No.41392 of 2016 b. Daga Nylomet Private Ltd. v. Assistant Collector of Customs, 1993 (67) E.L.T. 270 (Cal.) c. SHA Harakchand Dharmaji v. Commissioner of Customs, Madras, 1996 (88) E.L.T. 764 (Tribunal) d. A.K. Exporters v. Commissioner of Customs, Chennai, 2003 (157) E.L.T. 153 (Tri. - Chennai) e. Ramsons Garments Finishing Equip. P. Ltd. v. Commr. Of Cus., Bangalore, 2007 (211) E.L.T. 44 (Tri. - Bang.) f. T.I. Diamond Chain Ltd. v. Collector of Customs, Madras, 2004 (177) E.L.T. 209 (Tri. - Del.) A.3 In this regard, the Appellant also places reliance upon CBEC Circular No.1/2005-Cus. dated 11.01.2005 wherein on interpreting similar entry viz. "labeling machines which are for use in textile industry", the Board has granted benefit of exemption notification on the basis that even if the goods are general purpose machinery, so long as the goods are capable of use in textile industry, exemption benefit cannot be denied.
A.4 It is submitted that in the present case, the Impugned Order has not disputed the fact that subject goods are not capable of use with ADP machines. Further, as stated hereinabove, from a perusal of the relevant portions of the international standards as per which the subject goods have been certified, it is evident that the subject goods are designed and intended for use with ADP machines. Therefore, when the Appellant squarely falls within the terms of the exemption notification, the denial of exemption under the exemption notification must be set aside.
A.5 It is also pertinent to note that the exemption notification does not mandate any proof of end use criteria being met and the same cannot be read into the Exemption Notification. Further, that as the imported goods can also be used for another purpose on 7 Customs Appeal No.41392 of 2016 account of additional features does not bar the Appellant from claiming the Exemption.
A.6 The Impugned Order has failed to consider the above facts and has held that as the subject goods are capable of other uses the benefit under the exemption notification cannot be allowed. In this regard, the Impugned Order as well as the OIO have placed reliance on Explanatory Notes to Budget Speeches of the relevant financial year.
A.7 The Appellant submits that the reliance on explanatory notes to budget speech is misplaced. It is settled law that an exemption notification must be interpreted only in terms of the words that is used and no intendment or purpose can be accorded while interpreting the same. Further, it is well established law that only in case of any ambiguity, the benefit of interpretation must be given to the Revenue.
A.8 In the present case, it is evident from a plain reading of the exemption notification that the benefit of concessional rate is available to static converters capable of use with ADP machines. Therefore, there is no ambiguity in the language of the exemption notification. It is pertinent to note that while the Impugned Order states that there is an ambiguity in the exemption notification, it has not pointed out such ambiguity. Therefore, in the absence of any ambiguity, the conclusion that the exemption notification must be interpreted in favour of the Department is incorrect. Reliance in this regard is placed on the following decisions:
a. Hansraj Gordhandas v. HH. Dave, Assistant CCCE, Surat, 1968 (9) TMI 112 - SUPREME COURT 8 Customs Appeal No.41392 of 2016 b. Commissioner of Cus. (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.) A.9 In the light of above submissions, the Appellant submits that the Impugned Order is liable to be set aside and the subject goods must be held eligible for benefit of concessional rate of duty under the exemption notification.
A.10 Notwithstanding the above submissions, the Appellant submits that the issue is no longer res integra and has been recently decided in favour of the Appellant by the Kolkata Bench of the Hon'ble Tribunal in M/s. Cyber Power Systems India v. Commissioner of Customs (Port), Kolkata, 2024 (2) TMI 875 - CESTAT KOLKATA. Vide the judgment, the Hon'ble Tribunal has reaffirmed that as long as the goods are capable of use with data processing equipments, these shall be eligible to benefit of the exemption notification.
It is prayed that the appeal may be allowed.
4. The Ld. AR Shri. R. Rajaraman appeared and argued for the department. It is submitted that in the instant case there is no dispute on the classification of the goods. The dispute is only regarding the interpretation of the exemption notification. As per the notification 'Static converters for automatic data processing machines and units thereof, and telecommunication apparatus' are eligible for exemption.
The goods (UPS Systems) imported by the appellant is capable of multiple uses like domestic, industrial, critical applications, industrial networks, severs, telecommunications and Health care etc. The UPS system which are used for such application other than automatic data 9 Customs Appeal No.41392 of 2016 processing machines and units thereof, and telecommunication apparatus are not eligible for exemption under the notification. The importer was asked to execute end use bond to protect the interest of revenue. This was refused by the importer in their reply dated 11.01.2012 stating that there is no such condition stipulated in the notification. This itself would show that the goods imported by the appellant is capable for use other than automatic data processing machines and units and telecommunication apparatus.
5. The Ld. AR argued that the exemption notification has to be understood by the plain language used in the notification without ignoring the objects and reasons for which the exemption notification has been issued by the Government. The purpose of issuing the notification should not be defeated. Further, the person who claims exemption must establish that he is eligible for exemption and in case of doubt and ambiguity the benefit must go to the State. In the present case, the purpose of notification can be ascertained from the explanatory notes to the budget speech (Budget Financial Speech 2005-06 on 28.02.2005) which clearly states that the Customs duty is being exempted on the specified tariff line covered under the Information Technology Agreement (ITA). All goods imported for the manufacture of ITA bound items subject to end use condition will be eligible for exemption from customs duty. From the reading of the notification along with the budget speech it is clear that the intention of the government is to exempt either the goods which are directly used in the IT industry or such goods required for manufacture of the above goods subject to end use condition. The appellant importer is 10 Customs Appeal No.41392 of 2016 a trader and has not adduced any evidence to show that the imported goods are directly used only in the IT industry. Therefore, the goods are not eligible for the notification benefit.
6. Further, the goods are capable of multiple uses like domestic, industrial, healthcare, critical application etc. and the goods have the power rating of 200 KVA. The appellant importer having not proved the end use of the goods is not eligible for exemption. The appellant having not satisfied the condition of end use, the benefit of the notification has been correctly denied. The Ld. AR prayed that the appeal may be dismissed.
7. Heard both sides.
8. The issue to be decided is whether the appellant is eligible for the benefit of exemption at Serial No.4 of the Notification 25/2005 dated 01.03.2005. The relevant notification has already been noticed in first para above. The department has denied the exemption stating that the appellant has not furnished evidence to prove that the imported goods (static converters / UPS) are meant for use only for automatic data processing machine and telecommunication apparatus. The Ld. Counsel for appellant submitted that the importer being a trader is not able to vouch the end use of the imported goods. It is asserted by the Ld. Counsel that there is no such end use / actual use condition in the notification. On perusal of the notification it can be seen that the words of the notification read as 'Static converters for automatic data processing machines and units thereof, and telecommunication apparatus'. It is not disputed by the department 11 Customs Appeal No.41392 of 2016 that the imported goods are capable for use in ADP machines. The benefit of exemption has been denied stating that these goods can be put to use for other purposes also. The notification does not say that the goods have to be used only for IT industry as alleged by the department. The words of the notification are very clear and does not give rise to any ambiguity. When there is no ambiguity in the language of the notification the benefit of the concessional rate of duty cannot be denied by adding words into the notification.
9. The Commissioner (Appeals) observed that the appellant has not furnished any evidence, vouching the end use and has not fulfilled condition of notification. In the reply dated 11.01.2012 the appellant submitted that there is no such condition stipulated in the notification therefore not able to execute such a end use bond. In para 17 it is noted by the adjudicating authority that the goods are not eligible for benefit of the notification as the goods are not meant for use only for automatic data processing machines and telecommunication apparatus. The relevant finding of the adjudicating authority in para 17 is reproduced as under:-
With the facts and circumstances regarding the said notification, which is for ITA bound goods and the importer's inability to qualify the imported goods as only for automatic data processing machines and telecommunication apparatus use, the importer's claim for duty exemption under said notification is not acceptable.
10. The Commissioner (Appeals) has taken a similar view while upholding the order of the adjudicating authority. The finding of the Commissioner (Appeals) is as under:
From the plain reading of the above it is clear that the intention of the Government is to exempt either the goods which are directly used in the IT industry or such goods 12 Customs Appeal No.41392 of 2016 required for manufacture of the above goods subject to end-use condition are only exempted for the payment of basic customs duty. The assessee being a trader had not come out with any un-impeachable evidence to show that the impugned goods are directly used only in the IT industries. The appellant being a trader cannot vouchsafe that the goods will be used only in the IT industries. With such an uncertainty the condition and purpose of the notification cannot be fulfilled.
11. The adjudicating authority as well as the Commissioner (Appeals) has relied on the Explanatory notes of the budget speech to hold that the object of the notification was to exempt goods for IT and Telecommunication industry only. The notification does not use the word 'only'. When the plain language of the notification is clear and unambiguous, the department ought not to have relied on extraneous aids to interpret the notification.
12. The appellant has furnished the catalogue of the goods before us. The same is reproduced as under:
____ Left blank______ 13 Customs Appeal No.41392 of 2016
13. The above would show that the goods imported are nothing but UPS/Static Converters and capable of use for connecting to automatic data processing machines.
14. The very same issue was considered by the Tribunal in the case of M/s. Cyber Power Systems India Vs. Commissioner of Customs 14 Customs Appeal No.41392 of 2016 (Port), 2024 (2) TMI 875 CESTAT Kolkata. The relevant para reads as under:
2. The facts of the case are that the appellant- importer M/s. Cyber Power System India Private Limited filed Bill of Entry No. 5295329 dated 24.04.2014, for clearance of 864 pieces of Home UPS and 3009 Pcs of UPS for Data Processing Equipments and 20 pieces of Charger for UPS collectively valued at Rs.77,54,295.20/. The imported goods were self-assessed by the importer who claimed benefit of notification aforesaid for exemption from payment of Basic Customs as Duty in respect of imported goods "Static Converter for Data Processing Equipment."
The said benefit was however not claimed in respect of Charger for UPS. The imported goods were assessed provisionally, in view of related party transactions and due process of law followed thereto. During the course of examination, the authorities observed that the Home UPS viz. the goods at Item No. 1 & 2 of the Bill of Entry/Invoice were nothing but household inverter without battery and that the said goods were meant to be used for appliances, such as Tube light, Energy Saving Lamps, TV etc. In view of the aforesaid, the department was of the opinion that Item No. 1 & 2 described in the invoice filed along with the Bills of Entry, as Home UPS were mere power supply units for Data Processing Equipments and were not eligible to be treated as "Static Converter for use in Data Processing Machines," to which the notification applied to.
xxxx xxxx xxxx xxxx
5. We note that the said notification extends benefit of customs duty exemption to Static Converter for Data Processing Equipment, classifiable under Chapter No. 850440. There is nothing restricting the claim of the said exemption, as long as the imported goods meet the said description. Their duality of use or exclusivity of usage are immaterial. In fact, the wordings of the notification do not relate the benefit to any end use of the said goods. All that is mandatory to be eligible to avail of the said duty benefit is the requirement of the product being a "Static Convertor for Data Processing Equipment." There is no end use verification prescribed or required to be satisfied in order to avail of the said duty concession. Further, it is settled law that an exemption notification is to be read into strictly and no word can be added or deleted thereto; there being no room for intendment and regard is to be given to the clear meaning of the words. There are a catena of decisions on the subject and just to place on record following decisions of the apex court are referred to.
(i) Hansraj Gordhandas Vs. NH Dave, Assistant Collector of Central Excise and Customs, Surat & Ors.
(AIR-1970 SC 755).
15
Customs Appeal No.41392 of 2016
(ii) Commissioner of Sales Tax, UP Vs. Modi Sugar Mills Ltd. (AIR- 1961 SC- 1047) used.
5.1. The Ld. Commissioner vide his impugned order, while examining the aspect of admissibility of the exemption notification, has gone into the definition of static converters as contained in the HSN. However, it would be noted that the said definition referred to by him is an inclusive definition and it cannot be deemed to impute only those items as contained in the HSN explanation. For ready reference, the said definition is extracted, from the order under reference of the Ld. Commissioner.
"13...................In terms of explanatory notes to Harmonized Commodity, Description and Coding System(HSN), as applicable for goods of CTH 8504, these static converters include rectifiers, inverter, AC converters, DC Converters, Gas Discharge Converters, Electrolytic rectifiers stabilized suppliers (rectifiers combined with regulator) e.g. Uninterrupted Power Supply (UPS) for a range of electronic equipments."
The Ld. Commissioner has interpreted this definition to impute that the Home UPS is "classifiable under CTH 850440, but it does not qualify for exemption under Sl. No. 4 of Notification No. 25/2005Cus as the said static converters are not exclusively for Data Processing Equipment."
7. Under the circumstances, we find no merit in denying the exemption benefit referred to supra to the imported goods. Further, in view of our findings that there is nothing amiss in the declaration and nothing has been concealed, we are of the view that the case does not warrant confiscation of the imported goods and imposition of penalties.
8. Under the circumstances, we hold that the impugned goods are eligible for exemption benefits as claimed by the importer/appellant in terms of Notification No. 25/2005 Cus dated 01.03.2005 (vide Sl. No.4) and as referred to in para 4.
9. The order for confiscation of the goods and imposition of penalty is set aside and the appeal filed is allowed with consequential benefits as accrue in law.
12. In the case of Escorts Limited Vs. Collector of Customs, 1990 (47) ELT 68 (T) the question considered was whether the concessional duty can be denied merely because the equipment used for testing 16 Customs Appeal No.41392 of 2016 purpose in the automotive industry is also usable for general purpose. The Tribunal answered in the negative and in favour of the assessee. The relevant para of the decision is as under:
1. The issue for decision in this appeal is the eligibility of the appellant for the benefit of Notification No. 243/78-Cus., dated 26-12-1978, which grants concessional rate of duty to the goods specified therein, falling under Chapter 90 of the Customs Tariff Act which are designed for testing purposes in the automotive industry.
2. The appellant imported noise and vibration measuring and analysing equipment consisting of instrumentation tape recorder type 7005 F, Power supply type 2G 0199, tape spools type QH 1003, Charge amplifier type 2635, accelerometer type 4371 S and other accessories. As per the catalogue submitted for portable instrumentation tape-recorder types 7005 and 7006, the goods are for recording of vibration and sound data, etc. covering a frequency range from DC to 60KHZ. The appellants' claim for the benefit of Notification No. 243/78 was rejected by the Deputy Collector on the ground that the equipment imported is for general purposes including use in automotive industries and cannot be said to be designed for use in automotive industries. The Collector (Appeals) confirmed the Deputy Collector's Order, holding that the imported goods have been constructed for achieving more purposes than merely serving the testing purposes in automobile industry and cannot, therefore, be said to have been "designed" for testing purposes of the automobile industry. The order of the Collector (Appeals) is challenged before us.
7. A perusal of Notification No. 243/78 shows that there is no condition imposed that the equipment imported must be designed "exclusively" or "entirely" for testing purposes in the automotive industry. The Collector (Appeals) has erred in holding that, because the equipment is a multipurpose one, it cannot be said to have been designed for testing purposes of the automobile industry.
8. The citations relied upon by the learned Consultant are squarely applicable to this case. In the case of Collector of Customs, Bombay v. Living Media (Order No. 34/89 B.2 dated 31-3-1989), the Tribunal had occasion to deal with the eligibility of the assessee for the benefit of exemption under Notification No. 11/77 Cus., dated 15-1-1977 in the case of import of film/paper processor. Relying upon the decision in 1983 E.L.T. 1103 (Andhra Patrika, Madras v. CC, Madras), wherein it was held that "if, in addition to film processing the machine can perform other function of paper processing as well, exemption cannot be denied", the Tribunal granted the benefit of the notification to the assessee. In the case of T.I. Diamond Chain Ltd., Madras v. CC, Madras (Order No. 278/89-B.2 dated 18-8-
1989), the Tribunal has held that merely because a machinery 17 Customs Appeal No.41392 of 2016 (Vickers Hardness Tester) could perform other functions, benefit of the exemption cannot be denied.
9. The ratio of the above cited cases fully covers this appeal. The benefit of Notification No. 243/78-Cus., dated 26-12-1978 cannot be denied to the appellant merely because the equipment imported, in addition to its use for testing purposes in the automotive industry, is also used for general purposes.
10. In the light of the above discussion, we hold that the appellant is eligible for the benefit of exemption under Notification No. 243/78-Cus., dated 26-12-1978, set aside the impugned order and allow the appeal with consequential relief.
13. In the case of Daga Nylomet Private Ltd., Vs. Asst. Collector of Customs, 1993 (67) ELT 270 (Cal.) The Hon'ble High Court considered the meaning of the word 'for' used in TH 84.45 and held that it does not mean actual use. the relevant discussion of the Hon'ble High Court is as under:
1. The dispute in this case is whether the machinery imported by the petitioners is a textile machine. The petitioners say that the machine imported is a textile winding machine and is covered by Heading No. 84.45 sub-heading 8445.40 to the First Schedule of the Customs Tariff Act, 1975 (referred to as the Act). The respondents say that the machine is classifiable under sub-heading 8479.89 of the First Schedule to the Act.
The relevant Tariff Headings are as follows :
"84.45 Machines for preparing textile fibres; spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft winding) machines and machines for preparing textile yarns for use on the machines of Heading No. 84.46 or 84.47.
Machines for preparing textile fibres :
8445.40 Textile winding (including weft-winding) or reeling 80% machines."
"85.79 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter.
8479.89 Others."
7. In my view, the word 'for' simpliciter, used in Tariff Heading 84.45 has been used in a descriptive sense and does not mean actual use. In other words, a textile winding machine would remain as such irrespective of the actual use to which it 18 Customs Appeal No.41392 of 2016 may be put. When the Central Government has thought it fit to take into consideration the actual end-use it has specifically said so in notifications issued by it. For example, by Notification No. 314/85-Cus., dated 11-8-1985 (as amended), exemption has been granted to moulds and dies falling within Chapter 84 of the First Schedule to the Act subject to the condition that it is proved to the satisfaction of the Assistant Collector of Customs that the said moulds or dies have been imported for the manufacture of artificial plastic articles. Notification No. 159/86-Cus., dated 1-3-1986 as amended, grants exemption to specified machineries, equipments for registered exporters of Gems and Jewelleries provided that the importer furnishes an undertaking to the effect that the imported goods would be used for the purposes specified. Similarly, Notification No. 349/86-Cus., dated 16-6- 1986 (as corrected and amended) relates to the grant of exemption to specified parts falling within Chapter 84 or 85 for the manufacture of electronic goods subject inter alia to the importer executing a bond to pay on demand such sum as may be determined by the Assistant Collector in respect of the goods as are not proved to have been used for the purpose of such manufacture. Reference may also be made to Notification No. 1/91-Cus., dated 1-1-1991 which grants exemption to specified machinery and accessories imported by manufacturers of jute products subject to the importer being an actual user engaged in the manufacture of jute products and subject to the importer producing evidence that the goods had been installed for the purpose of manufacture of jute products.
8. In this case there is no such restriction and as held by the. Supreme Court in the case of Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India and Ors. [1983(13) E.L.T, 1566]:
"When there is no reference to the use or adaptation of the article, the basis of end use for classification under a tariff entry is absolutely irrelevant."
20. In the facts of this case it must be held that the construction adopted by the respondent authorities in making the classification under Tariff Heading 8479.89 was perverse. The construction adopted by the respondent authorities on Tariff Entry 8445.40 is not one which it could reasonably bear. The decision in Collector of Customs, Madras v. K. Setty (supra) relied upon by the respondents cannot, therefore, stand in the way of this Court holding in favour of the writ petitioner. (See : Government of India v. English Electric Co. of India Ltd., Madras [1985 (21) E.L.T. 63]; Union of India v. T.S.R. & Co. [1985 (22) E.L.T. 701] and Indian Card Board Industries Ltd. v. Collector of C. Ex. [1992 (58) E.L.T. 508].
21. For all the aforesaid reasons the writ application must be allowed. The respondents are directed to allow clearance of the machine to the petitioner on the basis that it is classifiable under sub-heading 8445.40 of the First Schedule to the Act. 19
Customs Appeal No.41392 of 2016 Any order or proceeding against the petitioners on the basis that the machine is classifiable under sub-heading 8749.89 is quashed. In the facts of this case there will be no order as to costs
14. The Tribunal in the case of Sha Harakchand Dharmaji Vs. Commissioner of Customs, Madras, 1996 (88) ELT 764 (T) had occasion to consider similar issue as to the meaning of the words 'for use' in the leather industry. It was held by the Tribunal that for use does not mean actual use and that the importer cannot be burdened for establishing a condition of actual goods. The relevant paras reads as under:
4. We have considered the submissions made before us by both the sides. It is now seen that the exemption notification gives the benefit among other items to the goods which are imported into India in respect of PVA for use in the leather industry. The goods imported by the appellants admittedly fall under Sl. No. 36, Heading A of the notification. This position is admitted by the adjudicating authority. Therefore, there is no dispute in this regard. It is, therefore, admitted that the goods which are imported by the appellants fall under Heading A of the notification. In the case of the goods under Heading B the notification stipulates that the importer at the time of importation shall furnish an undertaking to the Assistant Collector to the effect that the said goods shall be used for the purpose specified and that the importer of the goods also shall produce an extract of such account duly certified by the manufacturer evidencing receipt of the said imported goods in the premises of the manufacturer and he shall also pay duty on demand and in case of failure to do so. These conditions are for importation of the goods described under Heading B of the notification. There is no such condition attached to the goods which are imported under Heading A of the notification.
Therefore, the words "for use" in the leather industry has to be interpreted by us. Shri V. Thyagaraj, the learned SDR stated that the words "for use" in the leather industry connotes actual use and not capable of being used. We are unable to accept this contention of the learned SDR in view of the fact that words used in the notification are "for use" in the leather industry. "For use" in the leather industry does not mean actual use. In the decision cited by the learned Counsel viz., 1988 (14) ECR 292, the Hon'ble Supreme Court in Para 10 has held as follows:
10. We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in 20 Customs Appeal No.41392 of 2016 this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of "such energy" (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, "goods actually used" or "goods used".
A perusal of the above decision goes to show that if the intention of the legislature was to limit the exemption only to such goods as are actually used by the importer the phraseology used in the exemption clause would have been different, as for eg. "goods actually used" or "goods used". In the present case, the phrase used is goods imported into India" for use" in the leather industry. Therefore, the principle laid down by the Hon'ble Supreme Court in the above case will apply to the case of the appellants. The contention of the SDR that the words "for use" should be taken to be actual use cannot be accepted. This decision of the Hon'ble Supreme Court was also taken note of by the Tribunal in the decision reported in [1991 (45) E.L.T. 553]. In that case also the issue involved was interpretation of the words used in the notification wherein the words used was "for use" in the context of penetrators used in the leather industry as per Notification 224/85. The Tribunal in the said decision has followed decision of the Hon'ble Supreme Court cited supra. The observation of the Tribunal in Para 16 of their decision is reproduced below :
"In the present case the notification permits exemption to penetrators imported for use in the leather industry. It has been shown that the substance imported has use in leather industry as a penetrator. Proof of actual use is not a condition attached to the exemption. If it were so, the notification would have provided for execution of a bond obliging the importer to produce proof of actual use as in the case of many other notifications. We, therefore, do not agree with the Revenue's contention that the benefit of exemption would not be available to the appellants since they are not engaged in the leather industry but are stockists for sale."
A perusal of the above decision goes to show that the burden of actual use is not a condition attached to the exemption, as otherwise the notification would have provided for executing a bond and obliging the importer to produce proof of actual use. In any event in the case of the goods falling under Heading A, there was no such condition attached and the conditions attached were only in the case of the goods described under Heading B of the notification. In view of the above, we are not able to agree with the contention of the learned SDR. At this 21 Customs Appeal No.41392 of 2016 stage, the learned Counsel for the appellants drew our attention to the Collectors' conference where this issue was taken and he also produced a copy of the minutes of the Collectors' conference which is reproduced below:
CONFERENCE CONCLUSION: After discussing the issue, the Conference recommended that since question raised by Bangalore Custom House is about the goods which can be used for general purpose also. T.R.U. should re-examine the issue whether the items of general use can be shifted to list `B'. The conference observed that items figuring at Sr. Nos. 30, 31, 35 and 36 may have alternative uses and not having exclusive use in the leather industry. T.R.U. should also check with C.L.R.I., Madras or with any other Institute under the control of C.I.S.R. for revising the list `A' to cover only those items which are exclusively used in the leather industry, to be in line with the intention of the notification. On the question whether, notification can be extended to traders, Conference felt that the same could be allowed as the items are not subject to any actual user condition.
5. It is thus seen from the conclusion arrived at the Collectors' conference that the appellants are entitled to the benefit of the notification in question. In the proviso, we set aside the impugned order and allow the appeal with consequential relief.
17. From the above discussions we are of the considered opinion that the denial of exemption benefit is not justified. The goods are eligible for exemption of the benefit at Serial No.4 of Notification No.25/2005. The impugned order is set aside. The appeal is allowed with consequential relief if any.
(Order pronounced in the open court on 15.04.2024) (VASA SESHAGIRI RAO) (SULEKHA BEEVI. C.S) Member (Technical) Member (Judicial) psd