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TMI Blog2005 (8) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... a Synthetics Ltd. [2000 (5) TMI 66 - CEGAT, COURT NO. III, NEW DELHI] and has not considered rival contentions on merits nor recorded findings thereon, it would be appropriate and in the fitness of things to remit the matters to CEGAT, now to Customs, Excise and Service Tax Appellate Tribunal (CESTAT) to decide them on all points in accordance with law in the light of observations made in this judgment. Appeal allowed. - Civil Appeal Nos. 8568-8569 with C.A. Nos. 8565-8567of 2001 - - - Dated:- 5-8-2005 - Ruma Pal, Arijit Pasayat and C.K. Thakker, JJ. Shri Mohan Parasaran, ASG, A.K. Ganguli, Rajiv Dutta, Sr. Advocates, T.A. Khan, Rupesh Kumar, P. Parmeswaran and B. Krishna Prasad, Advocates with him, for the Appellant. M/s. Suresh A. Shroff Co., Advocates (NP), S/Shri V. Lakshmi Kumaran, V. Balachandran and Rajesh Kumar, Advocates, for the Respondent. JUDGMENT These appeals are directed against a common judgment and order dated December 19, 2000 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as CEGAT ). By the said order, CEGAT disposed of five appeals filed by M/s. Pearl Engineering Polymers Limited ( Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued licence Nos. (a) p/CG/2133135 dated 2-6-94, (b) p/CG/2133262 dated 9-7-94 and (c) P/CG/2133763, dated 30-12-94. After scrutiny of import documents, licences were issued. The goods appeared to be imported in conformity with the items permitted under the licences. The Company also submitted copies of Letter of Credit (L/C), Equipments Supply Agreement between Zimmer and the Company and copy of Proforma Invoice No. 1863 dated 4th May, 1993. Physical inspection of imported goods was also made by visiting the plant site. The plant was in working condition and the capital goods indicated that there was no divergence of capital goods under EPCG Scheme. On verification of EPCG Scheme between Zimmer and the Company, it was noticed that the Company had collected from Zimmer Know how, Basic Engineering Agreement and Technical Assistance Agreement. The Company had imported designs, drawings and plans under the Know how and Basic Engineering Agreement on which appropriate amount of customs duty had not been paid. 5. A show cause notice was, therefore, issued on November 16, 1996 to the Company, Mr. Chand Seth, Chairman-cum-Managing Director and Mr. Arun Gupta, whole time Director a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om duty. The plea taken on valuation of drawings at DM 1,30,000/- in the letter dated September 30, 1997 was without prejudice to the basic contention that the entire consignment was exempted as books and not liable to payment of duty. No penalty, therefore, could be imposed either on the Company or on the officers. 8. Personal hearing was afforded to the Company on October 1, 1997. Advocates for the Company appeared. Mr. Chand Seth, Chairman-cum-Managing Director, Mr. Arun Gupta, Director and K. Srinivas, Consultant contested the matter. Time was sought for filing written arguments which was granted and written submissions were filed on 10th October, 1997 raising several contentions on the basis of various clauses in the agreement and on the merits of the matter. Reliance was also placed on certain decisions of this Court as well as of CEGAT. The main argument on behalf of the Company was that the supply was of printed books which was covered by Chapter Heading 49.01. Since they were exempted under Notification No. 107/ 93-Cus., dated March 30, 1993 and Notification No. 38/ 94-Cus., dated March 1994, the Company was not at all liable to pay custom duty. The Company also conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pay duty thereon. 11. Accordingly, the following order was passed : ORDER 54. In view of the findings hereinabove :- (a) I confirm duty demand of ₹ 4,18,12,425/-. (b) I order adjustment of the amount of ₹ 30 lakhs deposited by M/s. Pearl Engineering Polymer Ltd., voluntarily, towards the above confirmed demand of duty and direct that the remaining amount be paid forthwith. (c) I hold that the goods are liable to confiscation under Section 111(m) of the Customs Act, 1962. However, since the goods are not available, I refrain from ordering confiscation. (d) I impose under Section 112 of the Customs Act, 1962 a penalty of ₹ 1 crore (Rupee one crore) on M/s. Pearl Engineering Polymer Ltd. (e) I impose penalty of ₹ 50 lakhs (Rupees fifty lakhs) on Shri Chand Seth, Chairman-cum-Managing Director of M/s. Pearl Engineering Polymer Ltd., under Section 112 of the Customs Act. (f) I also impose a penalty of ₹ 25 lakhs (Rupees twenty five lakhs) on Shri Arun Gupta, Director of M/s. Pearl Engineering Polymers Ltd., under Section 112 of the Customs Act, 1962. 55. The penalties shall be paid forthwith. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Commissioner imposing duty and penalty. Resultantly, two appeals filed by the Department for enhancement of penalty on Chairman-cum-Managing Director and Director were dismissed. 14. Against the order passed by CEGAT, the department has filed these appeals. One of the appeals came up for preliminary hearing before a three Judge Bench on December 14, 2001. Delay was condoned and appeal was admitted. Notice was also issued for interim relief. In the meantime, stay was granted against refund of amount if not already refunded. The interim order was thereafter continued and hearing was expedited. On May 1, 2003, the appeals were placed for hearing before a two Judge Bench and the following order was passed : Heard the learned counsel for the parties. Learned Counsel for the appellant submits that the question involved in these appeals is covered by the decision rendered by this Court in Commissioner of Customs, New Delhi v. Parasrampuria Synthetics Ltd., (2001) 9 SCC 74 which reveals that the Tribunal s judgment on which the reliance was placed was set aside. As against this, Dr. A.M. Singhvi, learned Senior Counsel appearing on behalf of the respondent relied upon the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, submitted that the view taken by Larger Bench of CEGAT in Parasrampuria Synthetics Ltd. was correct and in accordance with law. It, therefore, could not have been interfered with by this Court as has been done in an appeal against the decision and the decision of this Court in Commissioner of Customs, New Delhi v. Parasrampuria Synthetics Ltd. does not lay down correct law and deserves to be overruled. It was also submitted that in that case, this Court did not consider in their proper perspective several decisions particularly decisions in Commissioner of Income Tax, Gujarat v. Elecon Engineering Company Ltd., (1974) 96 ITR 672 (Guj) and of this Court in Scientific Engineering House Ltd. v. CIT (1986) 1 SCC 11. It was submitted that though the point was directly covered by an earlier decision of this Court, a two Judge Bench attempted to distinguish the said case and came to incorrect conclusion. It was also submitted that earlier when these appeals were placed for hearing, a two Judge Bench was prima facie satisfied that Parasrampuria Synthetics Ltd. was not correctly decided and hence the matter was referred to a three Judge Bench. It was, therefore, submitted that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituting the whole or apart of a complete work and designed for binding. 5. .. .. .. 6. .. .. .. 22. The relevant headings and sub-headings read thus : 49.01 Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets 4901.10 In single sheets, whether or not folded 25% 4901.91 Dictionaries and encyclopedias, and serial instalments thereof 25% 4901.99 Other 25% 49.06 4906.00 Plans and drawings for architectural, engineering, industrial, commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts photographic reproductions on sensitized paper and carbon copies of the foregoing 25% 49.11 Other printed matters, including printed pictures and photographs 49.11.10 Trade advertising material, commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under : Effective rates for specified goods falling within Chapters 40, 41, 43, 44, 47, 48, 49 and 97 In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description specified in Column (3) of the Table hereto annexed, and falling within Chapters, heading Nos. or sub-heading Nos. of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in Column (2) of the said Table, when imported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in Column (4) of the said Table, subject to the conditions, if any, laid down in the corresponding entry in Column (5) of the said Table. S. No. Chapter/heading No. Sub-heading No. Description of Rate goods Condition 1 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4901.91 - Dictionaries and encyclopedias, and serial instalments thereof 4901.99 - Other This heading covers virtually all publications and printed reading matter, illustrated or not with the exception of publicity matter and products more specifically covered by other headings of the Chapter (particularly) Heading 49.02, 49.03 or 49.95. It includes : (A) Books and booklets consisting essentially of textual matter of any kind and printed in any language or characters, including Braille or shorthand. They include literary works of all kinds, text books and technical publications books of reference such as dictionaries, encyclopaedias and directories; catalogues for museums and public libraries (but not trade catalogues); liturgical books such as prayer books and hymn books (other than music hymn books of Heading 49.04); children s books (other than children s picture, drawing or colouring books of Heading 49.03). Such books may be bound (in paper or with soft or stiff covers) in one or more volumes, or may be in the form of printed sheets comprising the whole or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany could be said to be Books falling within Tariff Heading 49.01 and were entitled to exemption as Printed books . 28. It was conceded by the Department before us is that no doubt in Parasrampuria Synthetics Ltd., the Larger Bench of CEGAT decided the question of law in favour of assessee and against the Department, but the Department had taken the mater further and this Court reversed the decision of the Larger Bench in 2001 (133) E.L.T. 9 (S.C.) = (2001) 9 SCC 74. It was, therefore, submitted that the decision of CEGAT impugned in these appeals deserves to be quashed and set aside by allowing the appeals of the Department. It was submitted that two appeals have been filed by the Department for enhancement of penalty imposed by the Commissioner of Customs since the penalty was inadequate and required to be enhanced. In view of the fact, however, that CEGAT allowed the appeals of the assessee and quashed the Order in Original passed by the Commissioner of Customs, the appeals filed by the Department were dismissed. In the light of the decision of this Court in Parasrampuria Synthetics Ltd. the decision of CEGAT deserves to be reversed. In that case, both the appeals filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r whether or not in single sheets); 49.06 (Plans and drawing etc. for architecture, engineering, industrial, commercial, topographical or similar purposes, being originals drawn by hand; had-written texts; photographic reproductions on sensitized paper and carbon copies of the foregoing); and 49.11 (other printed matter, including printed pictures and photographs) and not under 4911.99 (other). The Larger Bench also noted that in some cases, a contrary view was taken. But relying on the majority of the decisions, it was held that the relevant heading was 49.01 of Schedule I of the Act. 31. No doubt this Court in an appeal against the order passed by the Larger Bench reversed the decision of CEGAT. The question, however, is whether the order passed by a two Judge Bench in Parasrampuria Synthetics Ltd. lays down correct law on the point. 32. Now, let us consider some decisions on this aspect. 33. In Elecon Engineer Co. Ltd., the High Court Gujarat was called upon to consider the question whether drawings and patterns acquired by the assessee from foreign company relating to know-how which formed basis of business of the assessee could be said to be books within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must bear both physical and functional characteristics of a book. It must be a collection of a number of sheets of paper or of other substance, having suitable size, shape and value, bound together at one edge so as to form a material whole and protected on the front and back with covers of some kind and functionally useful to the assessee for carrying on his business or profession. 35. The Court also referred to English decisions on the point. A reference may be made in this connection to a decision of Court of Chancery in Pretyman v. Pretyman, (1931) 1 Ch 521. The testator in that case had by his will inter alia bequeathed all the pictures, prints, statues, sculptures, articles of vertu books, furniture and plate to his trustees. The estate of the testator included 155 original manuscripts of the series of letters and papers known as Paston letters. Those letters and papers were not in the form of loose sheets included in portfolios or kept in a safe. They were mounted, or inlaid in sheets of paper and bound up in three volumes. The question before the Court was whether those three volumes could be said to be articles of vertu or book within the meaning of the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word plant would include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. 38. The Court quoted with approval the following passage of Lindley, L.J. in Yarmouth v. France, (1887) 19 QBD 647 : There is no definition of plant in the Act : but, in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, - not his stock-in-trade which he buys or makes for sale ; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business. 39. The Court also referred to functional test formulated by Lord Guest in Inland Revenue Commissioners v. Barclay Curle Co. Ltd., (1970) 76 ITR 62 (HL) : In order to decide whether a particular subject is an apparatus it seems obvious that an inquiry has to be made as to what operation it performs. The functional test is, therefore, essential at any rate as a preliminary. 40. The Court then formulated the test thus; Does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes produced before us, it contains documents in loose sheets merely put up in a folder. It has none of the characteristics of a book known in the common trade parlance. At any rate, the principal interest in the goods is related to transfer of technology to the assessee in the form of drawings, designs and plans for setting up a plant to manufacture polyster, polyster filament yarn and polyester staple fibre. Thus viewed from any angle, the goods imported by the assessee are not covered by Sl. No. 10 but are covered by Sl. No. 15 of the said exemption notification. The Court proceeded to observe; The question thus arises as to whether articles imported satisfy the requirement of Serial No. 10 of the notification. Incidentally, this Court in Scientific Engg. categorically posed a question as to whether apart from the physical form, the documents satisfy the functional test! The basic issue thus would be the nature of articles imported. Now what these documents are : admittedly in terms of the agreement between the parties, these documents cannot be attributed to be technical know-how in the shape of drawings, designs, plans and other literature: it is a literature or spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d manuals including those in loose-leaf form with binder, have been specifically referred to as nil duty article. It is in this context that the learned Attorney-General in support of the appeal contended that in general trade parlance a book is known by features like (i) a book has an author, (ii) a book has a publisher, (iii) a book is a priced publication, (iv) the book is available to all and sundry who pay for it, (v) the book does not have a memorandum of understanding, (vi) there is no confidentiality about the book, (vii) a book has a subject to deal, with, (viii) the pages are serially numbered and neatly bound, and (iv) last but not the least, it should have ISBN Code i.e. International Standard Book Number. 46. Our attention was also invited by the learned Counsel to dictionary meaning of the word Book . In the Penguin English Dictionary, it is stated; Book is a set of written, printed, or blank sheets bound together into a volume. 47. The Concise Oxford Dictionary, defines book as a written or printed work consisting of pages glued or sewn together along one side and bound in covers; a main division of a literary work or of the Bible; a set of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to CEGAT directing it to consider the case afresh by applying correct test and to take an appropriate decision. 52. The learned Counsel for the Revenue submitted that Elecon Engineers Ltd. and Scientific Engineering Housing Ltd. were rendered in different context. The basic issue was whether books were covered by the entry plant under the Income Tax Act. Those decisions, therefore, have no relevance to the issue in question since the entries are different. It was also submitted that since the article in question was to be used by the assessee and was prepared according to his requirement, it had no utility to others. Hence, it cannot be said to be a book in general sense. It was argued that this Court has considered the factual position in Parasrampuria Synthetics Ltd. and held that the article was not a book. It would not, therefore, be appropriate to hold otherwise in the present case. 53. In our opinion, all these questions have to be considered and decided by the CEGAT in the fact-situation of the case in hand. As already noted by us, some of the tests applied in Parasrampuria Synthetics Ltd. were not relevant and appropriate. The CEGAT will now consider the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be printed book covered by Chapter Heading 49.01, 49.06 or sub-heading 4911.99? 57. There is still one more aspect which is relevant. It cannot be disputed and is not disputed before us and is also concluded by a decision of a three Judge Bench in Associated Cement Co. Ltd. that the basic heading is 49.01. It deals with Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets . 49.11 covers Other printed matter, including printed pictures and photographs . Thus, specific or basic heading is 49.01 and residual entry is 49.11. Priority, therefore, has to be given to the main entry and not the residual entry. According to the Company, the case is covered by the main entry under 49.01, and in that view of the matter, one cannot consider the residual entry 49.11. 58. In Indian Metals Ferro Alloys Ltd., Cuttack v. Collector of Central Excise, Bhubaneshwar, 1991 Supp (1) SCC 125, this Court held that residuary item can be referred to and such item can be applied only when goods are shown to be not falling under any other specific item. If they are covered by a specific item, residuary item has no application. 59. The Court stated; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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