1987 (9) TMI 156 - AT - Central Excise

Issues Involved:

1. Eligibility for Project Import benefits under Heading 84.66 of the Customs Tariff Act, 1975.
2. Interpretation of "substantial expansion" under Heading 84.66.
3. The relevance of modernization and revamping in the context of substantial expansion.
4. Compliance with procedural requirements for Project Import benefits.

Issue-wise Detailed Analysis:

1. Eligibility for Project Import benefits under Heading 84.66 of the Customs Tariff Act, 1975:

The appellants applied for the Registration of Contract under Project Import (Registration of Contract) Regulation, 1965, to import a Newsprint Twin Flow Refiner for expanding their production capacity. The Assistant Collector of Customs rejected the claim, stating that the refiner was imported merely to modify the existing plant to achieve the installed capacity and not for the initial setting up of the plant or substantial expansion of an existing unit. This view was upheld by the Appellate Collector of Customs, who added that the imports were intended for repairs or improvement of defects, which does not qualify as substantial expansion under Tariff Heading 84.66.

2. Interpretation of "substantial expansion" under Heading 84.66:

The Tribunal observed that the mill was granted an industrial license to increase production from 30,000 to 75,000 tonnes per annum. The appellants imported the Twin Flow Refiner based on expert advice to increase the capacity of their Cold Soda Pulping Plant, which was producing less than expected. The Tribunal disagreed with the lower authorities' interpretation, stating that the import was clearly for substantial expansion of an existing unit, as the appellants aimed to increase production capacity significantly.

3. The relevance of modernization and revamping in the context of substantial expansion:

The Tribunal referred to the case of Collector of Customs, Bombay v. M/s. Bharat Heavy Electricals Ltd., where it was held that modernization and revamping could fall within the broad criterion of substantial expansion of an existing unit. The Tribunal concurred with this view, indicating that substantial expansion does not necessarily exclude modernization and revamping efforts.

4. Compliance with procedural requirements for Project Import benefits:

The appellants forwarded a license duly endorsed by the licensing authorities for assessment under Heading 84.66 as Project Imports. The Tribunal noted that the import was related to the substantial expansion of an existing unit, and the appellants had complied with the procedural requirements by obtaining the necessary endorsements and licenses. The Tribunal found that the lower authorities' interpretation of the tariff heading was unjustified, as the imports were for substantial expansion, not merely for repairs or improvements.

Separate Judgments:

Majority Decision:

The majority decision, delivered by K. Prakash Anand, allowed the appeal, stating that the import of the Twin Flow Refiner was indeed for the substantial expansion of the existing unit. The Tribunal emphasized that the appellants' efforts to increase production capacity qualified as substantial expansion under Heading 84.66.

Dissenting Opinion:

Harish Chander, Member (J), dissented, holding that the imported refiner was intended for modifying the existing plant to achieve the installed capacity, not for substantial expansion. He upheld the lower authorities' findings, stating that the goods imported did not qualify for the benefit of Project Imports under Heading 84.66.

Resolution of Difference:

The case was referred to the President, S. Venkatesan, who concluded that the appellants were not entitled to the benefit of the concessional rate of duty under Heading 84.66. He reasoned that the operation was a modification to achieve the planned output, not a substantial expansion comparable to setting up a new unit. The President's decision aligned with the dissenting opinion, emphasizing that substantial expansion should involve an addition on a scale comparable to setting up a new unit.

Final Outcome:

The final order, based on the President's decision, rejected the appeal, denying the appellants the benefit of Project Import under Heading 84.66.

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