2015 (9) TMI 242 - AT - Customs

Revocation of Project Import Contract Substantial Expansion Non-fulfilment Appellant registered contract with Customs Authorities and made imports of machinery Vide order of Deputy Commissioner of Customs, Project Import Contract were deregistered and goods imported were assessed on merits and differential duty demand was made Reason for denial of project import benefit was that appellant s overall production capacity had not increased substantially to make it eligible for concession Tribunal vide impugned order remanded matter back to authority for afresh consideration Whether imported goods were for expansion of capacity to produce HTSLR wires Held that - If unit per se was not eligible for grant of benefit, it will not make any difference whether benefit was under category of substantial expansion or under category of initial setting up of unit There was no setting up of new stranded wire unit at all Only as part of existing plant for manufacture of wires including stranded wires, additional machinery were installed for making different type of stranded wires and overall capacity was maintained at existing level by allowing appellant to dismantle old machinery Certificate of project benefit recommended by DGTD was for substantial expansion of plant, inasmuch as capacity of plant remained same both before as well as after expansion, condition for availing benefit of project imports was not satisfied Appellant did not have any capacity to manufacture HTSLR wires prior to 1993 and therefore, import of machinery to manufacture said wires, cannot be said to be substantial expansion for purposes of Project Import Regulations Appellant has not satisfied condition of substantial expansion of existing installed capacity so as to be eligible for benefit of Project Imports As per majority view Appellant was not eligible for benefit of Project Imports Appeal dismissed Decided against Assesse.

Summary

Issues Involved:
1. Eligibility for Project Import benefits under CTH 9801.
2. Definition and interpretation of "unit" and "substantial expansion."
3. Technological and industrial capacity considerations.
4. Compliance with remand order for verification of capacity expansion.
5. Applicability of case laws and precedents.

Issue-wise Detailed Analysis:

1. Eligibility for Project Import benefits under CTH 9801:
The appellant sought Project Import benefits for machinery imported to expand the capacity of their HTSLR wire manufacturing unit. The Customs Authorities denied the benefit, arguing that the overall production capacity had not increased substantially. The Tribunal had to determine whether the expansion of the HTSLR wire unit alone qualified for the benefits under CTH 9801.

2. Definition and interpretation of "unit" and "substantial expansion":
The appellant contended that the term "unit" should refer to the specific section of the plant producing HTSLR wires, not the entire Borivli plant. The Customs Authorities argued that the entire wire manufacturing portion should be considered as a single unit. The Tribunal had to interpret whether the term "unit" in the Project Import Regulations referred to the specific section or the entire plant.

3. Technological and industrial capacity considerations:
The Customs Authorities examined the manufacturing process and concluded that the HTSLR wire production was not a separate, self-contained unit but part of the overall wire manufacturing process. They argued that the processes for both stranded and non-stranded wires were largely the same, except for a few additional steps for stranded wires. Thus, the technological feasibility of treating the HTSLR wire production as a separate unit was questioned.

4. Compliance with remand order for verification of capacity expansion:
The Tribunal had earlier remanded the case to verify if the imported machinery was for the substantial expansion of HTSLR wire production. The Customs Authorities found that the overall capacity remained the same, and the expansion was merely a replacement of old machinery with new machinery for a different type of wire. The Tribunal had to assess whether this verification complied with the remand order.

5. Applicability of case laws and precedents:
The appellant cited several case laws to support their claim for Project Import benefits, arguing that the expansion of the HTSLR wire unit should be considered substantial. The Customs Authorities relied on precedents like National Newsprint and Paper Mills and Travancore Titanium Products, which held that substantial expansion should involve an addition comparable to setting up a new unit. The Tribunal had to determine the relevance and applicability of these precedents to the present case.

Tribunal's Findings and Conclusions:

On the definition and interpretation of "unit":
The Tribunal concluded that the term "unit" referred to the entire Borivli plant, not just the HTSLR wire section. The industrial license and application for substantial expansion were for the whole plant, and the overall capacity remained the same. Thus, the expansion did not qualify as substantial under the Project Import Regulations.

On technological and industrial capacity considerations:
The Tribunal found that the manufacturing processes for stranded and non-stranded wires were largely identical, and the HTSLR wire production was not a separate, self-contained unit. The capacity for stranded wires depended on the capacity for drawing wires, making it illogical to treat the stranding process as a separate unit.

On compliance with remand order:
The Tribunal held that the Customs Authorities had complied with the remand order by verifying that the overall capacity remained the same and the expansion was merely a replacement of machinery. The substantial expansion requirement was not met.

On applicability of case laws:
The Tribunal found that the precedents cited by the appellant were not applicable to the present case. The facts of the case aligned more with the decisions in National Newsprint and Paper Mills and Travancore Titanium Products, where substantial expansion required an addition comparable to setting up a new unit.

Separate Judgments:
The Member (Technical) concluded that the appellant was not eligible for Project Import benefits, relying on the precedents and the interpretation of "unit" and "substantial expansion." The Member (Judicial) disagreed, arguing that the expansion of the HTSLR wire unit alone should qualify for the benefits. The Third Member (Vice-President) sided with the Member (Technical), resulting in a majority decision that the appellant was not eligible for the benefits, and the appeal was dismissed.

Final Order:
The majority decision concluded that the appellant was not eligible for the benefit of Project Imports, and the appeal was dismissed. The appellant was liable to pay the differential duty of Rs. 3,91,77,115/-.