Full Judgment Text
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CASE NO.:
Appeal (civil) 3940 of 1998
PETITIONER:
M/S.SHRIRAM VINYL & CHEMICAL INDUSTRIES
Vs.
RESPONDENT:
COMMISSIONER OF CUSTOMS, MUMBAI
DATE OF JUDGMENT: 20/03/2001
BENCH:
S.P. Bharucha, N. Santosh Hegde & Y.K. Sabharwal.
JUDGMENT:
Y.K.SABHARWAL,J.
L...I...T.......T.......T.......T.......T.......T.......T..J
After dismantling in their factory the existing
furnaces, the appellants assembled modernized furnaces
partly using imported parts, partly indigenously procured
parts and partly serviceable components/parts recovered from
the dismantled furnaces. In respect of imported parts used
in the assembly of the furnaces, the appellants claimed
benefit of Notification No.155/86-Cus dated 1st March, 1986
which provides for lower rate of duty. The Director General
of Technical Development, as the competent authority under
the notification, recommended the grant of lower rate of
duty prescribed in the notification in respect of the
imported parts. The benefit of the notification has,
however, been denied to the appellants on the ground that no
new furnace emerges in the assembly operation undertaken by
them. The Tribunal in the order under challenge affirming
the order of Collector of Customs of Appeals states:
"The furnace from which the unserviceable parts were
discarded, serviceable parts were re-used along with some of
the imported parts and some of the indigenous parts
purchased locally, were not entirely different from the old
furnace and the incorporation of the improvements into them
did not make them substantially new. The expression used in
the exemption notifications are ‘initial setting up’,
‘assembly’ and ‘manufacture’ of the specified articles. A
harmonous reading of these expressions will clearly
establish with what is required is the setting up, assembly
or manufacture of a new article which if imported could have
been liable to customs duty and that even if the parts are
imported and not the complete article the same rate of
customs duty, as applicable to complete article will be
applicable to such parts. The parts in this case were not
for the initial setting up, assembly or manufacture of a
furnace: the modernisation of the already existing furnace
will not amount to the assembly of a furnace for the
purposes of the treatment of such parts as at par with the
complete furnace, had the complete furnace been imported (in
place of the parts). The Collector of Customs (Appeals) had
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observed that modernisation and assembly for the purposes of
Notification No.155/86-CUS were two different things and
that in case of assembly an entire new product emerges
whereas in case of modernisation certain alterations and
modifications are made increasing production efficiency and
reducing costs."
The material part of notification reads as under:
"In exercise of the powers conferred by sub- section (1)
of section 25 of the Customs Act, 1962 (52 of 1962), and in
supersession of the notifications of the Government of India
in the Ministry of Finance (Department of Revenue)
Nos.94/86-Customs and 95/86-Customs both dated 17th
February, 1986, the Central Government, being satisfied that
it is necessary in the public interest so to do, hereby
exempts parts required for the purpose of initial setting
up, or for the assembly or manufacture, of any article
specified in column (2) of the Table hereto annexed, when
imported into India and proved to the satisfaction of the
Assistant Collector of Customs to be so required for such
setting up, assembly or manufacture, from so much of that
portion of the duty of customs leviable thereon which is
specified in the corresponding entry in column (3) of the
said Table..."
The main ground on which the benefit of the aforesaid
notification has been denied to the appellants is that
serviceable parts out of the dismantled furnace were used
besides some indigenous parts along with the imported parts
and, therefore, new furnace has not come into existence.
The contention of learned counsel for the appellant is that
the notification does not require that a new article must
come into existence. We agree. The three expressions
‘initial setting up’, ‘assembly’ and ‘manufacture’ cannot be
construed to mean same thing. It is evident from the
notification that the expression ‘assembly’ has been
separated from the expression ‘initial setting up’. These
expressions are intended to cover different situations. We
are unable to accept the contention of learned Attorney
General that the expression ‘assembly’ is to take colour
from the expression ‘initial setting up’ and, therefore,
without new article coming into existence, the question of
claiming benefit under the notification would not arise.
The language of the notification is clear and plain. The
notification is to be construed reasonably and rationally
and not in a manner which deprives the benefit thereof. The
expression ‘assembly’ in the context and setting in which it
has been used cannot be construed to mean bringing into of a
new article. This expression cannot be equated with the
expression ‘manufacture’. If the construction as placed by
the Tribunal is accepted, it would render the expression
‘assembly’ in the notification redundant. The expression
’assembly’ has been used as opposed to dismantle. The
notification does not contemplate denial of its benefit on
the ground of reuse of certain parts and/or use of some
indigenous parts with the imported parts. Thus, the
appellants are clearly entitled to the benefit of the
notification.
As a result of aforesaid discussion, the impugned order
is set aside and the appeal is allowed. The parties are,
however, left to bear their own costs.
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