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TMI Blog2015 (9) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... for making different type of stranded wires and overall capacity was maintained at existing level by allowing appellant to dismantle old machinery – Certificate of project benefit recommended by DGTD was for substantial expansion of plant, inasmuch as capacity of plant remained same both before as well as after expansion, condition for availing benefit of project imports was not satisfied – Appellant did not have any capacity to manufacture HTSLR wires prior to 1993 and therefore, import of machinery to manufacture said wires, cannot be said to be substantial expansion for purposes of Project Import Regulations – Appellant has not satisfied condition of substantial expansion of existing installed capacity so as to be eligible for benefit of Project Imports – As per majority view Appellant was not eligible for benefit of Project Imports – Appeal dismissed – Decided against Assesse. - C/760/2006-Mum - Final Order No. A/2208/2013-WZB/C-I(CSTB) - Dated:- 13-11-2013 - Shri P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J) Third Member on reference : Shri S.S. Kang, Vice President Shri T. Vishwanathan, Advocate, for the Appellant. Shri Navneet and Devendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of Tariff Heading 98 as it speaks of expansion of an existing unit of specified industrial plant. Project Import Regulation, 1986 also makes the position clear by defining unit as any self-contained portion of an industrial plant etc. However, the ld. SDR is right in pointing out that the various letters on record speaks of the overall production and not specifically about the production capacity of HTSLR wire unit. This position is required to be verified. Accordingly, while the appellant s case is allowed on the question of interpretation of the legal provision, the case is remanded to the original authority for passing a fresh order after causing verification as to whether the imported goods were for expansion of capacity to produce HTSLR wires. The appeal is, thus, allowed by way of remand. In pursuance to the said order, the impugned order has been passed. 3. The ld. Commissioner has made the following observations in his order : - (1) Prior to the expansion undertaken by the appellant, the plant at Borivli had a capacity to produce 63000 MT of various types of steel wire, 4500 MT of bright bars and 9600 MT of stranded wires, the total capacity being 77100 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re stranded wires in Borivli factory with an annual capacity of 9600 MTs. They applied for expansion of capacity for manufacture of stranded wires vide application dated 7-10-1992 from 9600 MTs to 20000 MTs to the Secretariat of Industrial Approvals, Ministry of Industry, New Delhi and their application was allowed vide licence dated 4-12-1992. The said licence stipulated that the appellant should surrender 10400 MTs of capacity to produce other types of wires. Thereafter, they applied for Project Import benefits vide application dated 16-7-1993 and the Directorate General of Technical Development (DGTD in short) issued a certificate recommending grant of Project Import benefits under CTH 98.01 which was forwarded to the Customs Authorities vide letter dated 28-7-1993. They applied for registration of contract for Project Imports vide letter dated 13-9-1993 and their contract was registered and they imported the machinery required for project imports vide bills of entry dated 12-10-1993 and 2-12-1993. The goods were allowed clearance provisionally. Thereafter, after import and commissioning, they filed the requisite reconciliation statement and requested for finalization of provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, binding on the department. 4.7 From the production figures of low relaxation type stranded wire, it is evident that the existing unit has increased the product on capacity to 20000 MTs which implies that the installed capacity has been raised by more than 25% and therefore, the condition of substantial expansion has been achieved. 4.8 When the contract has been registered in 1993, the eligibility under CTH 9801 has been decided and it is not open to the department to raise any objection about coverage under 9801 now, more so, when the industrial licence and DGTD s recommendation were given after being fully aware that normal relaxation stranded wires is being replaced by low relaxation stranded wires. 4.9 From the Director s report for the audited annual reports for 92-93 and 93-94, it may be seen that the expansion project in question and production of the low relaxation wire was commenced in 93-94. 4.10 The ld. Counsel relies on the following decisions in support of his above contentions, namely, - (a) Share Medical Care - 2007 (209) E.L.T. 321 (S.C.) (b) Hindustan Petroleum Corporation Ltd. - 2007 (213) E.L.T. 609 (Tribunal) (c) Devidayal El ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the plant. This is a finding based on verification authorized by the Tribunal s remand order. 5.7 While considering the stay application against the impugned order, this Tribunal in order dated 12-9-2006 [2006 (204) E.L.T. 460] made the observation that a mere increase in production will not amount to substantial expansion of the unit as has been held in National Newsprint and Paper Mills [1987 (32) E.L.T. 153] and Travancore Titanium Products [2002 (148) E.L.T. 640] upheld by the Apex Court [2003 (154) E.L.T. A175 (S.C.)]. These observations clearly show that the adjudicating authority has not exceeded the mandate given in the remand order and the issue to be decided is whether the applicant has a separate unit for manufacture of stranded wires which has undergone substantial expansion? The adjudicating authority has therefore correctly concluded that the appellant is not eligible for benefit of project imports. He also relies on the decisions of this Tribunal in the case of Reliance Industries Ltd. [1995 (80) E.L.T. 831] and Bennett Coleman Co. Ltd. [1997 (94) E.L.T. 661] in support of his contentions. 6. During the hearing we had directed the appellant to produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of wires at Borivli. It is therefore proposed to reduce the manufacture of certain types of obsolete wires so that the total capacity for manufacture of wires, bright bars and stranded wires will remain at 77100 tonnes. As a result, there will be no additional requirement of infrastructure in terms of land, buildings, power, water and transportation of raw material or finished goods. ... We again wish to restate that the increase in the capacity for Stranded Wire will be simultaneous with the reduction in capacity for other wires so as to retain overall wire capacity at 77,100 tonnes p.a. 7.3 Their application was considered by the Department of Industrial Development and vide letter No. LI 550 (1992) dated 4th December, 1992, Industrial Licence was granted, the relevant portion of which reads as follows:- With reference to your above application, Government are prepared to issue an Industrial Licence under the Industries (Development and Regulation) Act, 1951 to you for effecting substantial expansion to your industrial undertaking at MOUJE MAGATHANE Tehsil, Dattapara Road, Borivli East, District Bombay in the State of Maharashtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility point of view. The ld. Adjudicating authority has extensively examined this issue in para 17 of the impugned order. The starting point for the manufacture of the stranded wire as well as other varieties of wires is the wire rod which is the main raw material. The first stage in the manufacturing process as per the flow chart submitted by the appellant is testing of the raw material with respect to its physical, chemical and metallurgical properties. Thereafter, the wire rod is subjected to the process of patenting which is a heat treatment to give the wire rod a homogenous structure and to make it suitable for drawing of wires. The said process gives strength and toughness to the wire. After this process, inspection is undertaken to ensure the suitability of the wire rod for cold drawing, to check the tensile strength and metallurgical soundness. After inspection, the wire rod is subjected to the pickling process, that is scales on the wire rod is removed by immersion in the acid to make it suitable for drawing. After pickling, the material is subjected to lubricant coating , that is, phosphate and lime soap coating. This coating acts as a lubricant carrier, corrosion r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned section or portion for manufacture of Stranded Wires. The stranding machines are also installed in the same place/premises where the other machines are installed. If that be so, how can there be a separate unit for the stranded wires? This also goes to show that the unit for which expansion of capacity was given was the whole Borivli plant and not any part of that plant or any unit of such plant since no separate unit exists for manufacture of stranded wires. 7.8 It is in the light of the above facts, the case laws relied upon by the appellant have to be seen with respect to their applicability to the facts of the present case. As regards, the Share Medical case relied upon by the appellant, the issue for consideration before the Hon ble Apex Court pertained to Notification No. 64/88-Cus. which provided duty exemption on medical equipment imported by 4 categories of hospitals. The appellant therein claimed benefit under category 2 which was granted. Subsequently they claimed benefit under category 3 which was rejected. In that context, the Hon ble Apex Court held that it is a well settled law that in case the applicant is entitled to benefit under two different notifications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpansion of the Borivli plant of the appellant and inasmuch as the capacity of the plant has remained the same both before as well as after expansion, the condition for availing the benefit of project imports is not satisfied. Thus the ratio of the Zuari case also cannot be applied to the facts of the present case. With regard to the Himalayan Co-op Milk Product Union Ltd. case, the issue related to grant of small scale exemption to goods falling under Tariff Item 68 of the erstwhile Central Excise Tariff. Since notification 105/80-C.E. granting exemption stipulated a condition with regard to the investment in plant and machinery for manufacture of goods falling under the said item 68, the Apex Court held that investment for manufacture of goods falling under other item nos. need not be considered. Thus the facts are once again different and distinguishable. The case of Devidayal Electronics was also similar to the Himalayan Co-op Milk Product case mentioned above and therefore, the ratio of the said case has also no relevance to the facts obtaining in the present case. 7.9 Now let us see whether the case laws relied upon by the Revenue has relevance to the issue. In the Travanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case before us, there was no production of HTSLR wires at all in the Borivli plant before import of the present set of machines and what was manufactured was HTSNR wires. The project envisaged replacement of production of HTSNR wires with HTSLR wires as is evident from the application dated 7-10-1992 made by the appellant and the; approval dated 4-12-1992 granted by the Ministry of Industry. Further the overall capacity of production of wires also remained constant at 77100 tonnes. In these set of facts, following the ratio of the decision discussed above, it is not possible to hold that there was substantial expansion of an existing unit for the purpose of grant of Project Import benefits and we hold accordingly. 7.11 In the Reliance Industries Ltd. case cited supra, a question arose whether the meaning of substantial expansion envisaged in the Industries (Development Regulation) Act, 1951, can be considered for determining the meaning of expression substantial expansion in the context of Project Import Regulations. This Tribunal held as follows : - From the Textile Commissioner s letter dated 10/11-4-1966, what is brought out is that the various machines covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installation of imported goods resulting in modernization and renovation thus increasing productive capacity does not amount to substantial expansion for the purposes of assessment under CTH 9801.00 under Project Imports. In the present case before us also, the facts are identical. The machines have been imported to upgrade the technology of manufacture and to produce superior type of wires as is evident from the application dated 7-10-1992 submitted by the appellant to the Ministry of Industry. Upgradation of technology is nothing but modernization. Thus if on account of modernization, there is increase in productive capacity, that cannot be considered as substantial expansion of the existing unit as per the ratio of the above decision. 7.13 We have also perused the Director s Report which is part of the Balance Sheet for the year ended on 31st March, 1994. In the said report, it is stated as follows : - The project for the manufacture of Low Relaxation Stranded P.C. Wire was commissioned in March, 1994. The product will enable the company to maintain its leadership and dominant market share for this sophisticated product, which finds its use in the manufacture of bridges a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, it is evident that earlier, before expansion, the installed capacity for manufacture of HT Stranded wires was 9600 MTs which after expansion has become 20,000 MTs per annum. 10.2 It is further evident from the record mentioned in para 7(ii) of the impugned order that after expansion, the production of HTS Wires have gone up to 20,000 MTs per annum approximately. The production figures are as per monthly RT-12 returns filed by the appellant with the Central Excise department, which is as follows : - Year Production (in MT) 1995-96 19,173 1996-97 18,078 1997-98 21,418 1998-99 18,847 1999-00 20,245 2000-01 19,118 2001-02 20,514 2002-03 22,431 2003-04 21,780 2004-05 21,034 10.3 It is further evident from par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no substantial expansion in the wires manufacturing unit by erroneously mixing up the separate section(s) capacity for manufacture of various types of steel wires on one hand and for the HT Stranded wires on the other hand. 10.6 The reliance placed by the Commissioner on the noting of Ministry of Industries in its recommendation letter dated 4-12-1992 (Annexure-4 of the Paper Book) that the company would surrender a capacity to manufacture 10400 tonnes of other wires, so as to retain the total licensed capacity of the unit at the present level of 77,100 tonnes is not at all relevant. What is relevant and material fact is that there has been substantial expansion of more than 100% in the installed manufacturing capacity of HTS Wires unit, which is not in dispute. 10.7 The finding in para 16 of the impugned order is also misplaced and against the scope of remand by the earlier order of the Tribunal dated 22-11-2004. 10.8 Further, reliance placed by the learned Commissioner in para 17-18 of his order, on the fact that initial part of the production process before expansion is similar is misplaced and misconstrued. By doing so, the learned Commissioner has lost sight of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The difference of opinion on the issue is whether the appellants are entitled for the benefit of project import under the Project Imports Regulations, 1986 by classifying the goods under Chapter Heading 98 of the Customs Tariff. The case of the appellants is that the appellants made substantial expansion of the capacity of their wire unit to the extent of 25%, therefore are entitled for the benefit of project import. 17. From the facts of the case, I find that the appellants are having wire manufacturing unit at Borivli plant. Before expansion, the capacity of the plant is as under : - (i) Various types of steel wires - capacity 63000 MT; (ii) High Tensile Stranded Normal Relaxation (HTSNR) Wires - 9600 MT. 18. The appellants got permission from the Department of Industrial Development, Ministry of Industry, to manufacture High Tensile Stranded Low Relaxation (HTSLR) Wires to the capacity of 20,000 MT of existing 9600 MT of HTSNR wires. The permission was granted on the condition that the appellant would surrender a capacity to manufacture 10400 tonnes of other wires so as to retain the total licensed capacity of the unit at the existing level. 19. The appellant ..... 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