9911796707
TMI Blog1994 (1) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the schedule appended thereto falling within the Chapters 84, 85 or 90 of the first schedule and Section 3 of the Customs Tariff Act respectively subject to certain conditions which inter alia are that the importers are Actual Users (Industrial) engaged in manufacture of jute products and registered with the jute Commissioner and that the importer should produce necessary evidence to this effect to the Assistant Collector of Customs at the time of importation. The machineries specified in the Schedule of the subject notification should be such machineries as are suitable for use in manufacturing jute products. The Department did not allow clearance of the goods after the filling of the bill of entry but took up a detailed investigation, so as to examine the importers' claim for duty exemption benefit. The investigation was carried out by S.I.I.B and the officers of S.I.I.B obtained the relevant document/correspondence/ files pertaining to import of the subject machine from the importers, under summons issued under Section 108 of the Customs Act, 1962. They also collected certain documents from M/s. Greaves Cotton & Co. Ltd., Bombay who are the Indian representatives of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed machine they shall not exceed their licence capacity or 250 mtrs., per annum etc. While justifying their requirement of the machine intended to be imported by them, the appellants, inter alia stated in their application that the newer method of inter locking fibres called mechanical bonding is done by the Needle Punching Machine. They further stated that due to high cost of labour, raw material, power, the paper manufacturers have shifted to wider and also more sophisticated productive paper machines particularly news print machines and that these wider and high speed machines are required for production of wider and high quality felts with Mono Filament Base Fabrics and Needle punch Fibres. They also indicated that their customers in India are those whose requirements are for wider width of felts for printing wider news prints. According to the importers, the Indian customers for using wider width of felts are as under : 1. M/s. Tamilnadu Newsprint & Paper Ltd., Trichy 2. M/s. Mysore Paper Mills Ltd., Bhadravati 3. M/s. Hindustan News Print Ltd., Kerala They further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peed and inherent reliability. The leaflet/catalogue attached with the C.G. application indicated the machine description as Paper Maker Felt Needle Loom NL 18/A and NL 18/B. On or about 24-1-90, the appellant vide their Letter No. 3/DJ/245/90 requested Director (TRU) of Ministry of Finance to extent the similar benefit of duty exemption as is given for Jute Industry to the composite felt making Plant for Textile Industry. They referred to their earlier representation No. CE/DJ-22/13826, dated 27-9-89 and stated that Textile Industry is also facing crisis like Jute Industry and on the same ground, benefit of duty exemption was requested to be extended to a few machines including needle looms to be used in Textile Industry. On or about 31st Jan., 90, the appellant made an application to Ministry of Textiles for concessional rate of duty for Paper Maker Felt Manufacturing machinery, wherein they have stated that they would like to clarify that the pattern of consumption of Paper Makers Felts by user Industries has radically changed in the recent past. They further stated that from the woollen, cotton as well as wool synthetic blended felts used by the Paper Industry in past, the tren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of their products (Felts), they intend using jute fibres with synthetic fibres or wool, and jute fibres content would range between 25% to 40% and the remaining will be either synthetic fibre or wool. During investigation of this case, Deptt. came to know from the correspondence of the appellant that M/s. Greaves Cotton & Co. Ltd. is the indenting agent in India for the machine imported. Accordingly M/s. Greaves Cotton & Co. Ltd. were contacted and the documents relating to the import of this machine were collected. M/s. Greaves Cotton & Co. Ltd. furnished Agency Agreement dated 1-1-81 vide their letter dated 10-11-90. The said Agency Agreement mentions about different subjects like sales activity, prices, sales, delivery and payment conditions, acceptance of orders, invoicing, payment of invoices, commission for transactions, amount of commission etc. Under the clause regarding amount of commission, a commission amounting to 10% for machines respecting to List 1 (which inter alia covers sheet machine Laboratory needle loom, pre-needling machine for paper makers needle felts etc.) and 5% for machines respecting to list 2 (which covers various types of paper maker felt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the appellant company and statement of the General Manager Shri Mayur Desai was also recorded by the Investigating Officers. Shri S.G.K. Shetty had inter alia submitted that till March '89, they were allowed to manufacture textiles using predominantly wool and the licence was subsequently amended to use cotton and synthetic fibre; further he added that their licence was amended on 30-7-90 to use jute fibre. He had stated that they were not engaged in manufacture of jute products till they got endorsement under Entry 23(2) of IDR Schedule. He had also mentioned that they have intimated to Textile Ministry that they intend to use 25% to 40% of jute fibre and the remaining would be either wool or synthetic. He had further stated that they had no intention of manufacturing jute products including paper maker felt out of jute fibre at the time of import application for needle loom i.e. (Paper Maker Felt Needle Punching Machine) which is under clearance at present. He had stated that they had approached Ministry of Textiles, New Delhi for obtaining concessional duty for the machine under clearance which was rejected without assigning any reason. Shri Mayur Desai, General Manager ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... msp;Investigating Officers further obtained information as to whether or not the paper makers felts contain any jute fibre. The write-up submitted by M/s. B.K. Paper Mills, Bombay indicated that as far as their knowledge goes, there is no jute based paper making felts. They further confirmed that they have never used any jute based paper making felts in their paper mills so far, M/s. Ballarpur Industries Ltd., Bombay, another paper manufacturing unit also confirmed that felts being used at their Ballarpur Unit do not have any jute contents. The appellant had also addressed a letter dated 20-6-90 to the Industrial Credit & Investment Corporation of India Ltd. seeking enhancement of loan amount of Rs. 2.37 crores, on account of payment of Customs Duty payable on the subject machine. They had further pointed out in the said letter that the Customs duty and clearance charges at the rate of 82% would be Rs. 3.18 crores. 4. Therefore, on the basis of these investigations, the Deptt. issued a show-cause notice. It was urged that Notification No. 489/86-Cus., dated 18-12-86, as amended by Notification No. 283/89-Cus. covers certain machineries as per the schedule annexed to the notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o import paper makers felts making machine for manufacturing of such paper makers felts which do not have any jute content. Therefore, it was alleged that imported machine was for meeting the requirement of production of wider non-woven paper makers felts and for having maximum utility for the other related pre-processing machines (for which they had obtained separate import licences) like Cross Lapper and Pre-Needler Machines. It was also alleged that the importer's claim for duty exemption benefit for this machine to be used for manufacturing felts, was turned down by Ministry of Textiles. Therefore, it was alleged that the importers having failed to obtain duty exemption for paper makers felts manufacturing machine, decided to make a wrongful claim of duty exemption for the same paper makers felts needle punching machine by making wrong declaration that the paper makers felt needle punching machine would be used in manufacture of paper makers felts containing jute. The Department also relied on Section Notes 3, 4 and 5 of Section XVI pertaining to machinery and mechanical appliances of Customs Tariff Act, 1975, which appeared to indicate that composite plant with two or more ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ASSESSABLE VALUE Rs. 3,97,50,724.00 B. DUTY PAYABLE Under heading 8449.00 of Customs Tariff Act, 1975 read with Notification No. 59/87-Cus. at the rate of 35% + 45% + CVD Nil Rs. 3,18,00,579.00 The allegations were summed up as follows : (a) The goods in question should not be confiscated under Section 111(m) of the Customs Act, 1962. (b) The agency commission alleged to have been agreed to pay/or payable to Indian agent M/s. Greaves Cotton should not be added to assessable value in terms of the provision of Customs Valuation Rules, 1988 for the purpose of levy of the customs duty under the appropriate heading of the Customs Tariff Act, 1975. (c) The benefit of the concessional rate of duty claimed under Notification No. 489/86-Cus. as amended by 283/89 should not be disallowed in view of the facts explained in the foregoing paras and why normal rate of duty applicable for the said machine under Heading 8449.00 read with Notification No. 59/86-Cus. (35% + 45% + CVD NIL) which works out in this case approximately Rs. 3.18 crores should not be recovered on assessment of goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly as other needle looms which would be cheaper for manufacturing jute felt would be suitable for making such jute products". As regards the question as to whether the imported machines falls within the description in S. No. 19 of the said notification, the ld. Collector has summarised the finding in Paras 53 and 54 of his order as follows : "Under this Sr. No. 19, the exemption from duty is to a composite felt making plant including coating/garnating/ needle looms. From the perusal of the entry it is clear that the exemption is available to a composite felt making plant and while importing a composite felt making plant the exemption is also available to machines required for coating/garnating and needle looms. The expression "including" only means that for importing the composite felt making plant, an importing can also import along with it the other three machine viz. coating/garnating/needle looms even though these three machines may not necessarily be part of the composite felt making plant. This is how the Entry at Sr. No. 19 of the notification has to be read. Under this Sr. No. it is seen that composite felt making plant and the other three machines are permitted for impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp;We have heard Shri K. Srinivasan, ld. Consultant for the appellant and Shri B.K. Singh, ld. SDR for the Revenue. Ld. Consultant submitted that paper makers felts is also a felt and the appellants were manufacturing this paper makers felts for a long time. He submitted that there is no dispute about the import licence and the machine having been covered within the description of the licence. He submitted that the notification in question exempts specified jute machinery from basic and additional duty. The Govt. had envisaged this exemption in order to promote and protect the jute growers in terms of the national policy. The Government had been encouraging all the Industries to use jute in non-woven Industrial products for domestic as well as export purpose. The Govt. had announced a multifibre policy on 8-7-90. In this context, the IDR Act was amended to permit textile units (synthetic woollen and cotton) to use jute fibre and yarn also to manufacture jute products. Pursuant to all this change in policy the appellants applied for re-endorsement of their Industrial licence and the same was done on 26-7-90, permitting the manufacture of diversified jute products by utilising jute f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, entitled for the exemption. He also referred to the 100% examination from the Customs Authorities including the reference made to the article "Needle Felt" in Wool Hand Book furnished by the appellants. Thereafter, the department had delayed in clearing the goods hence the importers were compelled to go to High Court of Bombay and have a direction for issue of show-cause notice and the same was issued within a couple of days of going of the direction by Hon'ble High Court and thereafter the impugned order was passed. As per the order of the Hon'ble High Court, they had deposited Rs. 1.55 crores in cash and furnished bank guarantee of Rs. 1.58 crores and taken clearance of the cash. The ld. Consultant submitted that the Collector having dropped the allegation regarding the inclusion - of Agency Commission in the assessable value and also the mis-declaration of facts, therefore, it followed that the Collector have deemed to be accepted the transactions value in the present case. Therefore, there was no scope for issuing a less charge demand under Section 28 of the Customs Act, which is a provision for the issue of demand for duty which has not been levied or has been sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. Batt-on-base felts are made by needling fibrous layers on spun woven base cloth. These felts generally are of 35% to 50% synthetic fibre content. These type of felts are normally used on medium speed paper machines. Batt-on-mech felts are made by needling fibrous layers on filament woven base cloth. Combination type wet felts is similar to batt-on-mesh the difference being the multi-layer base fabric. Depending upon the paper machine press zone configuration/types, the felt making parameters are suitably changed to achieve required strength, surface smoothness, permeability etc. necessary for a particular press configuration/types and its operating conditions. Dryer felts, as their name implies, are used in the dry zone of the paper machine where the paper is finally dried. The felt, here, provides a proper contact of the paper sheet against hot cylinder. At the same time, the felt conveys the paper sheet through the drying cylinders. These type of felts are generally woven type made from cotton and synthetic fibre blends. Recently, synthetic filament woven felts are also being used in dryer felts. Paper machines can broadly be classified as cylinder mould type, foundrinier t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce consisting of Needling Beam, Bed Plate and Stripper Plate where by the repeated movement of needle through the fibre layer sufficient entanglement of fibres with each other is achieved giving the felt the required dimensional stability and strength. The third zone is the Stretch/Tension Carriage consisting of tension roller, tension carriage beam and side frames. The avoids crease formation in the felt and controls the shrinkage of the felt during needling, the felt being held under the required amount of tension. This adjustable tension is achieved by the movement of tension carriage on toothed racks and rails. The fourth and final zone is Feed Outlet Devices consisting of outlet rollers and deflection rollers. The motion of outlet roller gives the required amount of traverse to the felt to achieve the required amount of needle punching of felt; this motion also allows the felt to be taken out of the machine. The deflection roller provides a positive grip between felt and outlet roller surface. The felt is then edge trimmed to required width of felt. The felt thus obtained is a needled felt ready for end use." Ld. Consultant referring to the word "including" appear in the desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site Felt Making Plant and therefore, the use of jute also along with other fibres did not preclude the importer from claiming the benefit of the notification. 8. Ld. SDR Shri B.K. Singh appearing for Revenue pointed out that the goods were described in the bill of entry as Paper Makers Felt Needle Punching Machine (Needle Loom) type NL-18/II. This description given in the bill of entry was totally different from the one appearing in the notification. He pointed out to the material on record which has been relied by the Department to show that the importer also did not intend to utilise the machine for the purpose of manufacturing jute products. He pointed out that the notification had come much later than the appellants proceeding to finalise the deal in importing the machinery. He also referred to the statements of the parties and the agreement between M/s. Greaves Cotton & Co. Ltd. and the Importer. By these materials, it is clear that the appellant had intended to import this machinery for the purpose of expansion programme and not with a view to have a jute industry. Further, he pointed out that the appellant had not produced any evidence with regard to the utilization o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the geo-textile is only for the purpose of pregnation and it did not bring out any jute products. The notification was for the importing machinery which manufactured jute products and by no stretch of imagination it can be said that geo-textile used in Civil Engineering is a jute product. In the trade geo-textile was not considered as a jute product and the bill of entry also did not describe the machinery as paper makers felt. The imported machinery is of a very high value and it is for the production of endless felt which is used for paper industry. Referring to the Ministry's clarification with regard to the word "including" to be read as "with", the ld. SDR submitted that this clarification does not help the importer as the present machine does not satisfy, the basic requirement of the description in S. No. 19 of the notification. He further submitted that the notification has to be read strictly and the terms cannot be enlarged beyond the scope of the notification. In this context, he relied on the following rulings : 1. Rohit Pulp & Paper Mills Ltd. v. Collector of Central Excise - 1990 (47) E.L.T. 491 (S.C.) 2. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute raised on any of the facts narrated in the show cause notice. In Paras 48 and 49 of the impugned order, the ld. Collector has given a background of the case. The same is reproduced herein below : "Regarding the first question I find that the imported machine in, and there is no dispute about it, a paper maker's felt needle punching machine Type NL-18/II, to understand as to what this machine, is a little background of the case is necessary. Based on the correspondence of the importers themselves with different authorities and the supplier, which has also been discussed extensively in the show-cause notice, an exact idea about what the machine is can be had. The importers are engaged in the manufacture of paper maker felts and for this purpose they already had two needle punching machines of 5 mtrs. and 7.87 mtrs. width. The demand in the market for paper maker felt was for felts of greater width and for this purpose the importers wanted a machine which could manufacture paper maker felts of width 10.9 mtrs. When the importer wanted to import a machine of this type they also separately obtained import licence for certain other connected machines. The necessary requirements for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and inherent to the reliability. As has been noted by the ld. Collector in his order which is not disputed, that the plea of the importer for seeking duty relief for this machine was rejected by the Govt., Ministry of Textiles vide their Letter No. 17/17/89-WT, dated 28th April '90. The ld. Collector has also noted the correspondence, the appellant had with M/s. Greaves Cotton & Co. Ltd. The said agent by their letter dated 10-11-90 has stated that the machine imported is paper makers felt needle punching machine type NL-18/II and that the whole transaction was negotiated and dealt with by and between Dr. Emst Fehrer and the appellant. They have confirmed that such a machine had not imported earlier by any customer. The catalogue furnished by them had described the machinery as high capacity machine for finishing needling of one side of the felt. It is further described therein that with this basic model the success of Fehrer machine in the paper makers felt industry". The catalogue further described the paper maker felt machines are for the production of modern high technical felts for the wet and dry sections of all types of paper and cardboard making machines and that, with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been successful in manufacturing jute felt which could be utilized in the manufacture of geo-textiles. They have also produced their Product literature of geo-textiles which states that the appellant company has successfully undertaken filed trials with regard to the use of geo-textiles in almost all the important areas of Civil Engineering, Railways, Pavement overlays, dams, drains, canals, coastal protection. However, in this product literature produced by the appellant, there is no mention of use of jute felt. The ld. Collector has dealt with this issue and has held that the machinery is primarily designed and imported for manufacturing paper makers felt and their incidental activity cannot be a ground for grant of the benefit of the notification meant for jute products. We agree with these findings and confirm the same. Ld. SDR has brought to our notice that till date the appellants have not shown to us as to what extent the appellants have utilized jute fibre for manufacture of jute felt. They have also not in categorical terms stated to what extent the machinery has been put to such use. During the course of the arguments, ld. Consultant admitted that the jute felt manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (67) E.L.T. 30 (S.C.) = 1993 (48) ECR 2]. The Tribunal had also held that the ruling cited by the importer in the case of Collector of Customs v. Officer Photostat Printers as reported in 1991 (54) E.L.T. 142 was distinguishable. The Tribunal had also held that the ruling rendered in the case of Blue Star would not apply to the facts of the case. We are inclined to agree with view taken by the Tribunal as rendered in the case of M/s. Renewable Energy Systems Ltd. The reasoning given in Paras 10 to 12 of the majority order are noted herein below : "10. It is a settled proposition of law that any expression in a taxing statute has to be understood in the sense of what the trading community understands it because it is that community which is to deal with the Customs Act and the Customs Tariff Act. In other words, in order to interpret any entries whether in the said Act or under the notification issued there under commercial parlance test has to be applied. The goods described in the notification which are (Cold Chamber minus 30°C and below. The very name of the imported goods is different from the goods described in the notification and no evidence has been placed on record by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he test to be followed when the relevant notification do not contain any definition of the products. Same test in my view is required to be applied in the present case. It has not been found by the lower appellate authority nor shown by the respondents herein that the 'Cold Heat Test Equipment' is known as 'Cold Chamber' to the persons dealing in using the said goods. 11. I am also inclined to agree with the ld. SDR Shri B.K. Singh for the Revenue that the cases relied upon by the lower authorities, namely (i) 1991 (54) E.L.T. 142 and (ii) 1990 (50) E.L.T. 186 are distinguishable from the facts and circumstances of the present case. He rightly points out that in the latter case imported goods were 'automatic film/paper processor as described in the invoice. The imported goods apart from fully satisfying the description of the exempted goods in the notification merely perform another function. There was no dispute regarding the commercial parlance of the goods in question. Similarly, in the earlier case of C.C. v. Blue Star Ltd. - 1990 (50) E.L.T. 186 it was clearly found by the authorities below that the imported goods were 'basically devised to carry out the Vickers hardness test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twine and rope the adjudicating authority has found that the machine is used for making "jute felt". 16. I am of the view that whatever may have been the intention of the appellants in making the import of the subject machine, that cannot be guiding factor in determining its entitlement to Notification 489/86 (as amended) so long as on the date of import i.e. 27-8-90 or on the date of filing of the bill of entry the goods are covered by the said notification. Intention in my considered view cannot be a criterion for assessment of goods in a notification in the absence of any words to that effect in the said notification. There is no dispute that after the change in policy regarding use of jute fibre by other Textile Industries, the appellants herein fulfil the conditions that they are actual users (Industrial) engaged in the manufacture of jute products and they are also registered with the Jute Commissioner. Although, learned SDR, Shri B.K. Singh has tried to make some grounds that the appellants could not be said to be "engaged" in the manufacture of jute products in view of the word "engaged" used in past tense, I do not find much force in the said plea. The fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, cannot be extended to the appellants. 19. Before parting, I would like to put on record my view regarding another ground on which the lower authority has denied the benefit. It is that S. No. 19 allows benefit to coating/garnetting/needle looms only if it is imported along with Composite Felt Making Plant by use of the word 'including' in S. No. 19. This I feel is a wrong finding. It is a well settled proposition that the word 'including' is normally used to enlarge the scope of an earlier expression by including such things which may not normally get covered by the earlier expression. The word 'including' as submitted by the learned Counsel for the appellants cannot be equated with the word 'with'. The lower authority's finding, therefore, in my view is not correct on that point. If interpretation of the adjudicating authority is accepted, it will, in my view, lead to anamoly 'Needling' or 'Needle Punching' is an important process in manufacture of felts. If 'Composite Felt Making Plant' is permissible under S. No. 19, needle loom would ordinarily be included in the said plant. There would have been no need to show it separately under an inclusive clause. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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