1998 (1) TMI 291 - AT - Customs

Summary

Issues Involved:
1. Eligibility of imported equipment for customs exemption under Notification No. 155/86-Cus.
2. Interpretation of "initial setting up," "assembly," and "manufacture" under the exemption notification.
3. Applicability of the Calcutta High Court decision in Asiatic Oxygen Ltd. v. Collector of Customs.
4. Consideration of modernisation versus assembly in the context of customs duty exemption.

Detailed Analysis:

1. Eligibility of Imported Equipment for Customs Exemption under Notification No. 155/86-Cus.:
The primary issue revolves around whether the imported equipment for modernising the calcium carbide furnaces qualifies for customs duty exemption under Notification No. 155/86-Cus. The notification provides exemption for parts required for the initial setting up, assembly, or manufacture of specified articles. The Assistant Collector of Customs and the Collector of Customs (Appeals) both concluded that the imported goods were for modernisation, not for setting up or assembling new furnaces. The Tribunal upheld this view, noting that the parts were for modernising existing furnaces, not for initial setting up or assembly.

2. Interpretation of "Initial Setting Up," "Assembly," and "Manufacture" under the Exemption Notification:
The Tribunal examined the terms "initial setting up," "assembly," and "manufacture" as used in Notification No. 155/86-Cus. It was determined that "initial setting up" pertains to the first stage of installation, while "assembly" and "manufacture" refer to creating new articles. The imported equipment was intended for modernisation, not for setting up or assembling new furnaces. Therefore, the exemption did not apply as the parts were not for the initial setting up, assembly, or manufacture of a new furnace.

3. Applicability of the Calcutta High Court Decision in Asiatic Oxygen Ltd. v. Collector of Customs:
The appellants referenced the Calcutta High Court decision in Asiatic Oxygen Ltd. v. Collector of Customs to support their claim. However, the Tribunal found this case inapplicable because the facts differed significantly. In Asiatic Oxygen Ltd., the issue was about the initial setting up of new equipment, whereas, in the present case, the equipment was for modernising existing furnaces. Thus, the Tribunal concluded that the Calcutta High Court decision did not support the appellants' claim for exemption.

4. Consideration of Modernisation versus Assembly in the Context of Customs Duty Exemption:
The Tribunal distinguished between modernisation and assembly, stating that modernisation involves altering and improving existing equipment, while assembly leads to the creation of a new product. The imported parts were used for modernising the existing furnaces, which involved replacing and reassembling certain parts but did not result in a completely new furnace. The Tribunal cited the Supreme Court's decision in Cochin Company v. Commissioner of Income Tax, which established that reconditioned machinery must be substantially new to qualify for certain benefits. Applying this principle, the Tribunal concluded that the modernised furnaces were not substantially new and did not qualify for the exemption.

Conclusion:
The Tribunal upheld the decision of the Collector of Customs (Appeals), concluding that the imported equipment for modernising the furnaces did not qualify for customs duty exemption under Notification No. 155/86-Cus. The appeal was rejected, affirming that modernisation does not equate to the initial setting up, assembly, or manufacture of new furnaces, and thus, the exemption was not applicable.