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TMI Blog1991 (5) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... rt duty applicable under Heading 84.66 of the First Schedule to the Customs Tariff Act, 1975. The application for registration of the subsequent import of 1000 tonnes of H.R. Coils for testing in terms of the performance guarantee embodied in the contract was rejected on the ground that the goods are not covered within the scope of Heading 84.66 as they are not raw materials required for the manufacture of capital goods specified under Clauses A, B, or C of sub-heading No. 1 of Heading 84.66 nor are they raw materials essential for the maintenance of the plant. 2. We have heard Shri D.A. Dave, the learned Counsel and Shri M.K. Sohal, the learned DR. 3. The contract between the appellants and the sellers was referred to and our attention was drawn in particular to certain clauses of the agreement for the design, manufacture, delivery and supervision of erection, start-up, commissioning and testing of one complete unit of Sendzimir Cold Rolling Mill viz. articles 1 5. The learned Counsel also drew our attention to the clauses in the Schedule to the contract relating to demonstration of performance guarantee. He also referred to articles 1.02,1.06,1.11, 1.19,1.22,17.1,18,19,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of the Unit; and (v) The rule of beneficial construction should be applied in favour of the appellants to grant them the benefit of concessional rate of duty under Heading 84.66. 5. The following citations were relied on by the appellants : (i) 1983 (12) E.L.T. 829 (ii) 1985 (21) E.L.T. 273 (iii) 1985 (21) E.L.T. 873 (iv) 1985 (22) E.L.T. 68 (v) 1988 (38) E.L.T. 568 (vi) 1989 (44) E.L.T. 794 (SC) (vii) 1989 (44) E.L.T. 525 (viii) Order No. 1064 1065/83-B dated 17-11-1983 HAL (ix) Order No. 347/90-B2 dated 25-7-1990 - WEBEL Telecommunication Industries Ltd. 6. From a reading of the above rulings, he prays that a harmonised and practical interpretation be given to Heading 84.66 in the light of the contract and the import licence granted to the appellants. 7. In response the learned DR fairly concedes that there is no dispute regarding the materials being required for initial setting up of the unit and contends that the dispute revolves around whether the raw material imported is for the manufacture of components or the machinery enumerated in Clauses A, B, C or D of Clause 1 of Heading 84.66. According to the Department the raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified : (1) industial plant (2) irrigation project (3) power project (4) mining project (5) project for the exploration for oil or other minerals, and (6) such other projects as the Central Government may, having regard to the economic development of the country, notify in the official gazette in this behalf." 11. A reading of the terms and conditions of the contract between the appellants and the foreign sellers makes it evident that the import of the raw material is for the initial setting up of the Unit because the unit cannot commence production unless and until testing is carried out with the imported raw material in terms of the performance guarantee which is an integral part of the contract. The relevant extracts from the agreement are reproduced below : Article : 1 To design, manufacture, deliver and supervise the erection, start-up, commissioning and testing of one complete unit. 2 The Contractor shall remain liable to perform, fulfil and discharge all the obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave the right of inspecting and testing the contract work or any part thereof at any time during the manufacture, and the contractor on demand from the Purchaser shall carry out such tests in an appropriate manner in the presence of and free of charge to the Purchaser. Should the contractor himself not be in a position to carry out the tests, he shall, on the Purchaser s demand, prepare specimens or samples and send them at his own cost, to such testing stations as the Purchaser may specify and the cost for the test so effected shall be to the Contractor s account. Should a part of the plant be manufactured not on the Contractor s own premises but on other premises, the Contractor shall likewise obtain permission for the Purchaser to inspect and test the work as if the said plant were being manufactured on the Contractor s premises. The inspection, examination, or testing carried out by the Purchaser shall not release the Contractor from any of the obligations under the contract. 18.1 In all cases for tests at the site, the Purchaser except where otherwise specified, shall provide, free of charge, such labour, materials, fuel, stores, apparatus and instruments as may be required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are indicated in writing by the Purchaser, at the earliest possible moment. Such certificate, however, shall be deemed to be on account and shall in no way release the Contractor from his liabilities and responsibilities in respect of the contract plant as a whole. In special circumstances and at the Purchaser s sole discretion, provisional acceptance certificates may be issued for a part of the plant. Article 29.1 The final acceptance certificate of the contract plant as a whole will not be issued until proof is rendered of satisfactory integrated operation, that is to say, that the contract plant is capable of giving the guaranteed performance and output. 29.1.1 Until such time as the supply of drawings, documents and information required as per Article 12 are completed, the Purchaser will not issue the final acceptance certificate. 12. The performance tests were held on various dates and the contract plant was found to render satisfactory integrated operation as per the contract. Therefore, the final acceptance certificate was issued on 26-3-1983 certifying that the contract plant has given the guarantee performance and output as per Article 29.1. 13. The Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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