1982 (4) TMI 286 - AT - Customs

Summary

Issues Involved:
1. Review of order-in-appeal.
2. Registration of contracts for concessional duty under Heading 84.66 of C.T.A., 1975.
3. Interpretation of "substantial expansion" versus "modernization and revamping."
4. Compliance with the Project Import (Registration of Contract) Regulations, 1965.
5. Relevance of industrial licence amendment under Section 13 of the Industries (Development and Regulation) Act, 1951.

Issue-wise Detailed Analysis:

1. Review of Order-in-Appeal:
The Government of India issued a notice to review the order-in-appeal No. S/49-1369/79R, dated 20-3-1980, passed by the Appellate Collector of Customs, Bombay. The review was conducted under Section 131(3) of the Customs Act, 1962. The respondents replied to the notice on 5th February 1981. The proceedings were transferred to the Tribunal for disposal under Section 131B(2) of the Act.

2. Registration of Contracts for Concessional Duty:
The respondents applied for registration of contracts for importing goods required for the modernization of the Rourkela Steel Plant under Heading 84.66 of C.T.A., 1975, which provides a concessional rate of duty. The goods were covered by three import licenses dated 29-8-1978 and endorsed as "Project Import." The Assistant Collector rejected the application, stating that the goods were not required for the initial setting up or substantial expansion of a unit, and thus did not fall under Heading 84.66.

3. Interpretation of "Substantial Expansion" versus "Modernization and Revamping":
The Appellate Collector observed that modernization and revamping could result in substantial expansion. He noted that the modernization program would increase the actual working capacity by 56% and the installed capacity by 10%. He argued that "substantial expansion" should be interpreted in terms of actual working capacity rather than licensed capacity. The Assistant Collector's narrow interpretation of "modernization" and "revamping" was criticized for not considering the broader aspects of modern technology and productivity improvements.

4. Compliance with the Project Import (Registration of Contract) Regulations, 1965:
The show cause notice alleged non-compliance with the requirement of an industrial license amendment showing permission for substantial expansion as per Section 13 of the Industries (Development and Regulation) Act, 1951. The respondents argued that the modernization and revamping were approved by the Project Investment Board and endorsed as Project Imports by the Chief Controller of Imports and Exports. The Assistant Collector's rejection was based on a narrow interpretation, while the Appellate Collector's order was considered well-reasoned and judicious.

5. Relevance of Industrial Licence Amendment under Section 13 of the Industries (Development and Regulation) Act, 1951:
The review notice focused on the lack of an industrial license amendment for substantial expansion. The respondents contended that substantial expansion should be interpreted as commonly understood, involving any modification that results in a significant increase in production. They provided evidence of substantial increases in production capacity and improved control systems. The Appellate Collector's order was upheld, as the conditions for registration were substantially fulfilled, and the Assistant Collector's denial of registration was found to be unjustified.

Conclusion:
The Tribunal upheld the order-in-appeal and discharged the review notice, dismissing the appeal. The Tribunal found that the conditions for registration under the Project Import (Registration of Contract) Regulations, 1965, were substantially fulfilled, and the Assistant Collector's rejection was not justified. The modernization and revamping of the Rourkela Steel Plant were deemed to constitute substantial expansion, warranting the concessional rate of duty under Heading 84.66 of C.T.A., 1975.