Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5
CASE NO.:
Appeal (civil) 2532 of 2001
PETITIONER:
Commissioner of Customs, Mumbai
RESPONDENT:
M/s. Toyo Engineering India Limited
DATE OF JUDGMENT: 31/08/2006
BENCH:
ASHOK BHAN & MARKANDEY KATJU
JUDGMENT:
J U D G M E N T
BHAN, J.
Revenue has filed this appeal against the final Order No.
1813/2000-B dated 25.10.2000 in Appeal No. C/164/89-B2
passed by the Customs, Excise and Gold (Control) Appellate
Tribunal (for short "the Tribunal") whereby the Tribunal has
set aside the order in original as well as the order passed in
the appeal and held that the machinery and equipment
imported by the assessee-respondent was classifiable under
Heading 98.01 of the First Schedule to the Customs Tariff Act,
1975 (for short "the Tariff Act") and granted the benefit of
Project Import under the Project Import Regulation to the
assessee.
Facts:
Assessee-respondent (for short "the respondent") is
engaged in the setting up of industrial unit such as fertiliser
plant. M/s. Indian Farmers Fertilisers Cooperative Ltd.
entered into a contract with their parent Company M/s. Toyo
Engineering Corporation, Japan for designing, engineering,
fabricating and commissioning an Ammonia Storage Package
Unit and a Co-generation Plant. Their Parent Company in
turn entered into an agreement with the respondent to carry
out all the works, services, erection and commissioning of the
project on turn key basis. The respondent filed an application
on 17.03.1986 with the Contract Registration Cell for grant of
the benefit under the Project Import Scheme read with
Notification No. 72/85-Cus., dated 17.03.1985 in respect of
goods sought to be imported. Respondent has imported
various special construction equipments, available at their
overseas project at Kuwait, and filed eleven Bills of entry in
March, 1986 for the clearance of goods, which were cleared on
payment of duty under protest.
The Assistant Collector, under Adjudication Order No.
S/5-Misc. 376/86-CC, dated 18.08.1987, rejected the request
of the respondent for registration under the Project Import
Regulation on the ground that the imported goods are the
property of the respondent and even after execution and
completion of the work, these goods would remain the
property of the respondent and the ownership of the imported
goods would not pass on to the Project Authority. It further
held that as the goods could be used for other work elsewhere
after the completion of the present project, the imported goods
would not qualify for classification under Heading 98.01 of the
Tariff Act.
Being aggrieved, the respondent filed an appeal before
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5
the Appellate Authority which was rejected. It was held that
as per Heading 98.01 of the Tariff Act the items of machinery
or component parts should go into the initial setting up of the
unit and should not merely be used as an aid for the setting
up of the unit or its substantial expansion. As the respondent
could utilise the machinery elsewhere in the setting up of
other plants, the impugned goods could not be classified
under Heading 98.01 of the Tariff Act.
The respondent being aggrieved filed an appeal before the
Tribunal which has been accepted by the impugned order.
The Tribunal held that the grounds on which both the lower
authorities have denied the facility of project import to the
respondent were not sustainable in law. After detailed
discussion the Tribunal set aside each of the findings recorded
by the appellate authority and held that the respondent would
be eligible to the benefit asked for.
Heading 98.01 of the Tariff Act reads as under:
"98.01 All items of machinery including
prime movers, instruments, apparatus
and appliances, control gear and
transmission equipment, auxiliary
equipment (including those required for
research and development purposes,
testing and quality control), as well as all
components (whether finished or not) or
raw materials for the manufacture of the
aforesaid items and their components,
required for the initial setting up of a
unit, or the substantial expansion of an
existing unit, of a specified:
(1) Industrial plant,
(2) Irrigation project,
(3) Power project,
(4) Mining project,
(5) Project for the exploration for oil or
other minerals, and
(6) Such other projects as the Central
Government may, having regard to the
economic development of the country
notify in the Official Gazette in this
behalf; and spare parts, other raw
materials (including semi-finished
material), or consumable stores not
exceeding 10% of the value of the goods
specified above provided that such spare
parts, raw materials or consumable
stores are essential for the maintenance
of the plant or project mentioned in (1) to
(6) above."
Heading 98.01 covers all the items of machinery
including prime movers, instruments, apparatus and
appliances; control gear and transmission equipment,
auxiliary equipments besides components and raw materials
required for the initial setting up of a unit or the substantial
expansion of an existing unit of specified industrial plant.
The industrial plant would include fertiliser plant as well, as it
is designed to be employed directly in the performance of
processes necessary for manufacture of fertiliser. Since the
fertiliser plant is covered by the industrial plant specified in
Heading 98.01 of the Tariff Act all the "auxiliary equipments"
which are required for the initial setting up of the unit could
be imported under the Project Import Scheme.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5
As per Words and Phrases of Excise and Customs by S.B.
Sarkar "auxiliary" means:
"giving additional help; supplemental or
subsidiary; an item not directly a part of
a specific component or system but
required for its functional operation.
According to Black’s Law Dictionary, sixth edition,
’auxiliary’ means:
"Aiding; attendant on."
According to the World Book Dictionary, ’auxiliary’
means:
"a person or thing that helps; aid; syn;
accessory".
Webster’s Encyclopedic Unabridged Dictionary of the
English Language, (1996 Edn.) "auxiliary" means:
"giving support; serving as an aid;
helpful"
It is not disputed that construction equipments imported
by the respondent were used in the initial setting up of the
plant. The Assistant Collector and the appellate authority
denied the facility of the project import as the ownership of the
imported goods would not pass to the project authority and
that the machinery imported could be utilized elsewhere in the
setting up of any other plant. What is required under heading
98.01 Tariff Act is that the machinery imported should be
required "for the initial setting up of a unit, or the substantial
expansion of an existing unit". This heading specifically
mentions and includes "auxiliary equipment". The "auxiliary
equipment" has not been defined under the Tariff Act. As per
Dictionary meaning, extracted above, it is an equipment which
aids or helps. Any equipment which aids or helps in the
setting up of an industrial plant would fall and be covered
under heading 98.01 of the Tariff Act. The mere possibility of
its being used subsequently for other project would not debar
the respondent from availing the facility of project import. If
the contention of the Revenue is accepted, then resultant
effect as put by the Tribunal would be:
"\005no equipment can be imported for
projects like Konkan Railway Project,
Road Development Projects of the
National Highway Authority of India, etc.
specified under Heading 98.01 of CTA."
We agree with this observation of the Tribunal.
Counsel appearing for the appellant strenuously
contended that the respondent could not be given the benefit
of the project import under heading 98.01 of the Tariff Act in
view of the decision of this Court in the Punjab State
Electricity Board Vs. Collector of Customs, Bombay, 1997
(91) ELT 247 (SC).
We do not find any substance in this submission. In that
case this Court did not consider the vehicles imported to be an
item of auxiliary equipment required for setting up of an initial
unit on the ground that it was used only in shifting of the
transformers which would not constitute an integral part of
the power project. The vehicles imported were required for
transportation of the transformers from railway yards to the
erection sites and had no relation to power generation or
power project. After transporting the specified number of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5
transformers to the site of sub-station the utility of the
vehicles would be over at the end of such transport and
thereafter the vehicles could certainly be used for other
purposes of the assessee. That the vehicles, which are used
in the shifting of the transformers, would not constitute
integral activity of the project. In the present case goods
imported by the respondent are hydle truck cranes, excavator,
shovel loader, truck, forklift truck, power generators, diesel
welder, welding rectifier, containers tools and tackles
instruments, level Nako with tripod, theodlite nako with
accessories & tripod besides window air conditioners, electric
typewriter and camera with flash (the total cost of last three
items is only Rs.70,000/-, which is negligible). In fact, it was
not disputed before the Tribunal or before us as well that the
construction equipments imported by the respondent were
used in the initial setting up of the plant. The goods imported
by the respondent such as hydle truck cranes, excavator,
shovel loader, truck, forklift truck, power generators, diesel
welder, welding rectifier, containers tools and tackles
instruments, level Nako with tripod and theodlite nako with
accessories & tripod would certainly be auxiliary equipments
which would help in the initial setting up of the industrial
plant. The facility of the project import was denied to the
respondent because the ownership of the imported goods did
not pass to the project authority. Since it is not disputed that
the construction equipments imported by the respondent were
used in the initial setting up of the plant, then, as per the
provisions of heading 98.01 of the Tariff Act the respondent
could not be denied the benefit of the project import.
Before the Tribunal learned departmental representative
appearing for the Revenue had made various other
submissions such as (1) that absence of a contract specifically
registered for import of construction material; (2) that note (2)
to Chapter 98 according to which Heading 98.01 would apply
to goods which are imported in accordance with the Project
Imports Regulations, 1986; (3) that under Regulation 4 the
assessment under Heading 98.01 shall be available only to
those goods which are imported against one or more specific
contract which have been registered with the appropriate
Customs House. In the absence of a specific contract being
registered Heading 98.01 would not be applicable to the
impugned goods imported by the respondent; and (4) that the
benefit of concessional duty under Project Import was not
available if the goods had arrived before the application was
submitted for registration of the goods. All these submissions
were not allowed to be raised by the tribunal as these
submissions had been made for the first time before the
Tribunal. These submissions had neither been raised before
the adjudicating authority nor the first appellate authority. It
was held by the Tribunal that the Department could not be
allowed to make out a new case at the appeal stage.
Learned counsel for the Revenue tried to raise some of
the submissions which were not allowed to be raised by the
Tribunal before us, as well. We agree with the Tribunal that
the revenue could not be allowed to raise these submissions
for the first time in the second appeal before the Tribunal.
Neither adjudicating authority nor the appellate authority had
denied the facility of the project import to the respondent on
any of these grounds. These grounds did not find mention in
the show cause notice as well. The Department cannot be
travel beyond the show cause notice. Even in the grounds of
appeals these points have not been taken.
For the reasons stated above, we do not find any merit in
this appeal. We agree with the findings recorded by the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5
Tribunal. Accordingly, the appeal is dismissed, leaving the
parties to bear their own costs.