1993 (5) TMI 37 - AT - Customs

Summary

Issues Involved:
1. Eligibility of auxiliary equipment for concessional duty under sub-heading 9801.00.
2. Requirement of a specific contract for assessment under Heading 98.01.
3. Relevance of ownership and end-use of imported goods for classification under Heading 98.01.
4. Applicability of exemption Notification 72/85-Cus.
5. Validity of the reference to the Larger Bench.

Detailed Analysis:

1. Eligibility of Auxiliary Equipment for Concessional Duty under Sub-heading 9801.00:
The core issue was whether the auxiliary equipment imported by the appellants qualified for concessional duty under sub-heading 9801.00. The Tribunal noted that the term "auxiliary equipment" was not defined in the heading. The appellants argued that the equipment was essential for the initial setting up of the fertilizer project and should qualify for concessional duty. However, the Tribunal concluded that the equipment in question, such as cranes, excavators, and generators, did not directly go into the initial setting up of the unit but were more in the nature of material handling equipment. Therefore, these items did not meet the criteria for "auxiliary equipment" under Heading 98.01.

2. Requirement of a Specific Contract for Assessment under Heading 98.01:
The Tribunal emphasized that for goods to be assessed under Heading 98.01, they must be imported against one or more specific contracts registered with the Customs House. The appellants failed to produce a specific contract for the import of the goods, which is a mandatory requirement under the Project Imports Regulations, 1986. The absence of such a contract rendered the goods ineligible for assessment under Heading 98.01.

3. Relevance of Ownership and End-Use of Imported Goods for Classification under Heading 98.01:
The Tribunal discussed whether the ownership and potential future use of the imported goods affected their classification under Heading 98.01. The Department argued that the imported goods, being the property of the importer and not the project authority, could be used for other projects after the completion of the current project. The Tribunal agreed with this view, stating that the possibility of future use in other projects disqualified the goods from being assessed under Heading 98.01, which requires that the goods be specifically for the initial setting up of a unit or substantial expansion of an existing unit.

4. Applicability of Exemption Notification 72/85-Cus:
The appellants claimed that the imported goods should be exempt from duty under Notification 72/85-Cus. However, the Tribunal noted that this exemption could not alter the classification of the goods. Since the goods did not qualify for assessment under Heading 98.01, the question of applying the exemption notification did not arise.

5. Validity of the Reference to the Larger Bench:
The appellants contended that the reference to the Larger Bench was redundant. However, the Tribunal held that the reference was necessary to reconsider the narrow interpretation adopted in the Punjab State Electricity Board (PSEB) case. The Tribunal concluded that the reference was valid and required to resolve the doubts about the applicability of Heading 98.01 to the auxiliary equipment in question.

Conclusion:
The Tribunal concluded that the imported goods did not qualify for assessment under Heading 98.01 due to the absence of a specific contract and the nature of the goods not fitting the definition of "auxiliary equipment." Consequently, the benefit of concessional duty could not be extended, and the appeal was dismissed. The Tribunal also affirmed that the reference to the Larger Bench was appropriate and necessary to address the issues raised.