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TMI Blog1982 (4) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.66 of C.T.A., 1975. These goods were covered by three import licences all dated 29-8-1978 and endorsed "Project Import". The importers had clarified that the goods were being imported not for initial setting up of any new plant but for modernization and revamping of the existing plant. They also stated that the main plant was commissioned in 1961 and the modernization aims at- (i) Rolling of hot-roll strips of closer tolerance. (ii) Rolling of thinner gauges. (iii) Better metallurgical control on the cooling & finishing temperature. (iv) Better coiling facilities. (v) An increase in productivity with minimum alteration. They had also produced a study report prepared by Rourkela Steel Plant Metallurgical & Engineering Consultant India Ltd. on the modernization of the "Hot Strip Mill" from which it was noticed that the modernization may result in an overall marginal increase in the output of the product. They further stated that the capacity of each re-heat furnace which is reduced to 80t/hr. against the rated output of 100 t/hr is expected to increase by 115 t/hr. and the rated output of 1,106,000 t/year of capital HR Coils can be achieved in 5000 hrs. as against earlier 600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistent with all the different aspects of modern technology. If a better or higher output in terms of quantity or of value or a combination of both, are achieved, it ought to be considered as permitted within the omnibus expression "substantial expansion". He categorically asserted that substantial expansion should be with reference to the actual working capacity or attained capacity and not to the licensed capacity, which is largely notional. In the present case, it is not the 10% increase but the 56% increase in production which is relevant. He further observed that it is not necessary to refuse project import assessment on any vague doubts and nothing prevents refusing assessment or invoking the terms of the bond at the time of finalisation, in case there is any misuse of the concession initially allowed. By refusing to register the contract in the first instance, the tax payer is called upon to block huge amounts of its working capital and this effects not only the importer but every citizen including the Customs Officer. He, therefore, directed registration of the contract with provisional extension of the benefit of the project import regulations by the Assistant Collector. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Project Imports (vide annexure 'A'). Based on this sanction, three import licences were obtained and got endorsed as Project Imports, on the letter dated 20-9-1978 from SAIL and recommendation dated 18-10-1978 from the Ministry of Industry; and orders were accordingly placed. Prior to the import, the Assistant Collector was approached for registration of the contract under the Project Imports (Registration of Contract) Regulations, 1965, which he rejected without assigning any reasons and issued the order dated 20-3-1979 on being requested. The Appellate Collector was convinced that there would be substantial increase in production and improved control systems. The Government of India proposed to instal a separate cold rolling mill complex at Rourkela for producing hitherto imported silicon steel coils and sheets which necessitated substantial expansion to produce the necessary hot rolled coils for meeting its needs and also to improve the quality of strips. Substantial expansion has not been defined in the Customs Act or the Regulations and it has to be interpreted as commonly understood. Any modification in the existing system, which results in substantial increase in productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a concessional rate of duty to auxiliary equipment, components etc. required for the initial setting up of a unit or the substantial expansion of an existing unit of five specified industries and such other projects as the Central Government may notify having regard to the economic development of the country. It provides for registration of contracts in the manner prescribed by regulations under Section 157. These are known as the Project Import (Registration of Contract) Regulations, 1965 and these require that the DGTD should certify that the goods are imported for substantial expansion of an existing unit. This condition has not been fulfilled in the present case. The opinion of the Appellate Collector that the licensed capacity was not relevant, is of no consequence. Taxing statutes are to be strictly interpreted (1980 E.L.T. 736 Delhi High Court and AIR 1974 S.C. 1362 Supreme Court). He also relied on 1983 E L.T. 259. If there were two constructions which an entry could reasonably bear and one of them which was in favour of Revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the Court as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lex as "Project Import". Though the Department gave the facility to the cold rolling complex, they denied it for the Hot Strip Mill modification. Shri Kampani referred to Section 13(d) of the Industries (Development and Regulation) Act which provides that no substantial expansion of an industrial undertaking which has been registered can be effected except under a licence. He stated that substantial expansion means substantial increase in productive capacity or creation of virtually a new unit. The Project Investment Board approved the Project and the DGTD have certified that the benefit of the concessional rate as Project Import should be accorded. The industrial licences are also properly endorsed. The complete requirements of the law are, therefore, made and the department has no case to review the order of the Appellate Collector. In rebuttal, the learned SDR stated that the question of increase in quality is not relevant in considering whether there has been substantial expansion for purposes of the concessional rate. In any case on the basis of the rated capacity, the 10% increase after modernisation does not amount to substantial expansion. 6. Heading 84.66(d) covers i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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