9911796707
TMI Blog1993 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined. Question is whether 'unit' occurring in sub-heading 9801.00 and the word 'specified' would mean that the items of machinery and auxiliary equipment etc. which can be extended the benefit of the said sub-heading 9801.00 must be confined to a particular project, as appears to have been construed in the case of PSEB, mentioned supra by the Tribunal or it can be extended even to such items of machinery and auxiliary equipment which are liable to be used in different types of projects and industrial plant, as mentioned in that Heading 9801. From the reading of the description under sub-heading 9801.00, as extracted above, narrow construction of the sub-heading adopted in PSEB as confined to a particular project is perhaps not warranted. The items entitled to benefit, it can be argued with some force, may be used in any or all of the specified projects mentioned at S. Nos. (1) to (6) in the sub-heading 9801.00." 2. The matter was heard over a period of six sessions and detailed arguments were submitted by both sides. Before we proceed to the matter a brief narration of the facts may be made. The appellants imported a consignment of used and second-hand construction aids a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances, the imported goods would not on its own merit qualify for classification under 98.01. Director of Industries has no doubt recommended for project import benefit, but the issue of classification is to be decided by the Department". (Emphasis added) 4. When the matter went up in appeal to the Collector of Customs (Appeals), Bombay, he too rejected the appeal and the relevant extracts of his order are quoted below :- "……There is no doubt that all items of machinery including components or raw materials for the manufacture of the machinery required for the initial setting up of a Fertilizer Unit would be classifiable under Tariff Heading 98.01. However, what is important in this case is that such items of machinery or components etc. should be required for the initial setting up of a Unit or substantial expansion of an existing unit. This would denote that such items of machinery or component parts should go into the initial setting up of the Unit and should not merely be used as an aid for such setting up of the unit or its substantial expansion. In the present case, the appellants are only the contractors and the machinery used by them in the initial setting up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting up the specified project, the benefit of concessional rate cannot be denied to the appellants just because the appellants stated before Collector (Appeals) that if the imported machinery was still serviceable after being used in the project, they might make use of the same in some other project. (e) Since the subject goods were undoubtedly required for initial setting up of a specified notified project, the benefit of exemption from duty under Notification 72/85-Cus., dated 17-3-1985 as amended should be extended. (f) It has been held by the Supreme Court in the case of Dunlop India Ltd. • Madras Rubber Factory Ltd. v. Union of India Others [1983 (13) E.L.T. 1566 (SC)] that the condition of an article at the time of its import is a material factor for the purposes of its classification and any enquiry into its possible future use is entirely unwarranted. Neither Heading 98.01 nor Notification 72/85-Cus. contain any expression requiring the Customs authorities to make any such enquiries. The possibility of further use in any case depends on several unforeseen aspects and should not be taken into account. (g) Since learned Member (Technical) has suggested that a libera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, the wording of sub-heading 9801.00 was itself indicative of the end-use inasmuch as these would qualify for assessment under that sub-heading only if they were "required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified industrial plant etc.". For this, he referred to the decision of the Supreme Court in the case of Chowgule Co. Pvt. Ltd. Another v. Union of India Others [1987 (28) E.L.T. 39 (SC)], in which the expression "goods for home consumption" came up for consideration. The Apex Court held as under :- "14. In our view, for the purpose of levy of customs duty in order to determine whether any imported goods or "goods for home consumption", we have to find out the primary intended use of the goods when the goods are brought into Indian Territorial Waters." 10. In view of such an exposition of the law, the expression "required for initial setting up of a unit......." could not be interpreted in such a way that the subject goods were not used in the setting up of the project. Shri Arora contested Shri Subhedar's point about the requirement of the Customs authorities to make enquiries about future use, and submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods classifiable under Heading 98.01. The appellants' case is that they had filed the Bill of Entry for the clearance of their goods on 11th March 1986 and duty was paid on 25th March 1986. Therefore, on the date of clearance of the goods, which the learned Counsel has stated to be 27th March 1986 (with reference to Bombay Port Trust Import Application, dated 27th March 1986), there were no regulations to govern the classification of goods under Heading 98.01 and the saving clause in Project Imports Regulations, 1986 would save only things done or omitted to be done before such supersession (3rd April 1986) when the new Regulations came into force, which means the contracts registered before 3rd April 1986. Since the old regulations related to assessment under Heading 84.66, and the claim for registration of contract in the present case relates to assessment under Item 98.01, the old Regulations also would not apply. The consequence of this was that the appellants' contract could not have been registered on 17th March 1986 when they filed the application in the absence of regulations relating to Heading 98.01. 13. Shri Arora submitted that a question would arise as to how the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a substantial expansion of an existing unit of a specified industrial plant, irrigation project etc. When an importer registers a contract as required in the entry under the Heading 84.66 all the goods imported by him under that contract will be subjected to duty only as per that entry. It will not be open to the Revenue to pick out some of the goods imported under the contract and impose a different rate of duty on the footing that they would be covered by a different heading. If the conditions prescribed under the Heading No. 84.66 are satisfied, the duty is imposed on the goods imported under that heading, as if they form the composite unit." (Emphasis added) 18. In the decision of the Bombay High Court in the case of Orkay Silk Mills Pvt. Ltd. (supra), the High Court had held that the Transfer Printing Machine imported in that case was used only for printing on fabrics and could not be used for printing on garments direct and therefore its import was not held to be permissible. Similarly, for goods to be classifiable under Heading 98.01, they had to be project specific or, in other words, relatable to the specified project. In this view of the matter, the erection and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o assessment under this Heading. As regards the claim for exemption from duty under Notification 72/85-Cus., dated 17-3-1985, he submitted that this being a Notification under Section 25 of the Customs Act, the appellants were entitled to the exemption. He also referred to the decision of the Supreme Court in the case of Mohinder Singh Gill and Another v. Chief Election Commissioner, New Delhi Others [AIR 1978 SC 851] and submitted that it was not permissible for the authorities to start judging the validity of the order of the lower authorities on the basis of reasoning subsequently advanced and not found in the order. 20. When the hearing had almost concluded, Shri Subhedar submitted a Note in which he countered the arguments of the learned Departmental Representative that there is no reference whether the goods are auxiliary or not in the impugned orders, thereby appearing to have implied that the said issue was not discussed in the impugned order. He reiterated his argument that there was complete unanimity among all the Members of the Referring Bench all the findings of facts and law with the only difference that two Members took the initiative in making the present refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this provision relates to an export project undertaken by them and is not, as such, relatable to the type of import covered by Heading 98.01. It may be possible that such an equipment may be capable of being used in a contract awarded to the appellant company, and they may claim the registration of such a contract under the Project Import Regulations. Such a view is further strengthened by the fact that in their application for registration, they have mentioned that they have, at their disposal, necessary erection machinery equipment and other items lying at their overseas project and the same are being imported for use in the initial setting up of the fertilizer project of IFFCO at Aonla. They have also submitted in this application that the use of the imported goods is essential for initial setting up of the fertilizer project. These facts, which have come out from a careful scrutiny of the documents also establish that what the appellants are seeking to do is to make use of certain erection machinery etc. lying at their overseas project and this also explains the absence of a contract for the import of these goods. These facts have an important bearing on the view that we wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferring Bench, the claim for assessment under Heading 98.01 fails and the appeal is liable to rejection on this ground alone. 26. Coming now to the various contentions raised before us, the first is that the reference to the present Bench is totally redundant. That such a contention should have been raised before us without any basis is evident from the reading of paragraph 19 of the order of the referring Bench, which has been reproduced in the earlier part of this order. Learned Member (Technical) has expressed the view that a narrow construction of sub-heading 9801.00 as adopted in PSEB's case was not warranted and since he was inclined to take a liberal view, it was necessary that the matter be referred to a Larger Bench for consideration whether the auxiliary equipment in the present case can be extended the benefit of concessional duty. We, therefore, hold that having expressed the view that a liberal construction should be put on sub-heading 9801.00, the Referring Bench had necessarily to refer the matter to the Larger Bench so that the view taken in PSEB's case could be reconsidered. Therefore, the contention of the learned Counsel that reference to the Larger Bench was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter. 29. The next question is the learned Counsel's argument that the Department had admitted that the imported goods were to act as an aid in setting up the specified project and the benefit of assessment under Heading 98.01 should not be denied just because the appellants have stated before Collector (Appeals) that if the imported machine is still serviceable, they might make use of the same in some other project. This question has to be considered along with the other question about the condition of the goods at the time of their import and the end-use of the goods. We are unable to accept the contention of Shri Subhedar that the Department arrived at the finding about the nature of the imported goods as an aid in setting up the specified project because none of the lower authorities have gone into this question. The only question that was considered was whether the import of a private contractor was permissible and whether the possibility of the use of the goods elsewhere disentitles them from assessment under Item 98.01. Collector (Appeals) had also considered the question that the imported machinery should actually go into the initial setting up of the unit and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is that they have imported the erection machinery for use in the initial setting up of the fertilizer project and the use of the imported goods is essential for the initial setting up of the fertilizer project. The clear distinction between what is used in the initial setting up of the unit and what is required for the purpose has also to be borne in mind. Although the learned Counsel had made the point that their admission before Collector (Appeals) that the possibility of future use of the equipment should not be taken to go against their claim for assessment under Heading 98.01, the fact is that neither the wordings of Heading 98.01 nor the Project Import Regulations conceive of a situation of this nature. This itself is sufficient to show that the machinery, equipment etc. imported under project contract is required to go into the setting up of the unit of a specified industrial plant and other projects mentioned in Heading 98.01. In coming to this conclusion, we are in agreement with the arguments of the learned Departmental Representative on this question and the case law cited by him. In this connection, the observations of the Division Bench of the Madras High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the Members of the referring Bench; and it has to be answered keeping in view the majority opinion which indicates a full scope reference. 35. I also agree with Shri Bajpai that the reference to the Larger Bench was not redundant. 36. Having said so, I would like to emphasise that in this matter, the application dated 17-3-1986 was filed for registration with reference to the Heading 98.01 in respect of the goods regarding which the bill of entry had been filed on 12-3-1986 and duty was subsequently paid-for before import, on merit assessment of individual items, albeit under protest, and the goods were said to have been cleared on 27th March, 1986. 37. The significance of these dates lies in the fact that the old Tariff Heading 85.66 for project imports was substituted by 98.01 by the Customs Tariff Amendment Act vide Notification No. 30/86; but the old regulations namely the Project Import (Registration of Contract) Regulations, 1965 were replaced by the new Project Import Regulations, 1986 only on 3rd April, 1986 by Notification No. 28/86 dated 3-4-1986. 38. So a question has arisen as to what was the legal position in between 28th February, 1986 and 3rd April, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the present case as the question of maintainability of the petitioner's application for Registration is linked with it. In this respect I observe that the new Project Imports Regulations, 1986 were dated 3-4-1986 (and had not been given a retrospective effect). Therefore, the application filed on 17-3-1986 i.e. before this date, was not maintainable. 43. That apart, even if the new regulations were held to be governing the present case, there was nothing therein to warrant the presumption that the Contract referred to in the Clauses 4,5 and 6 thereof was, by necessary implications or otherwise, a contract, (for import of the goods) only with a foreigner or a party located abroad. 44. In my opinion the eligibility clause 4 (consequently other clauses) would cover importation against one or more specific contracts for initial setting up or substantial expansion of a plant or project in India i.e. a contract between the importer and the Project authorities as well. Hence in my opinion the absence of a contract with a foreigner or a party located abroad would not come in the way of grant of this benefit if the importer was otherwise entitled to it. Similarly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old Heading 84.66 and it was required to be shown whether similarly any notifications covering fertilizer projects were issued under Heading 98.01; but the same has not been done. In fact, the Government have issued notifications under 98.01(6) also such as 110/86 but fertilizer project is not one of the projects specified therein. Therefore, these goods which have been admittedly imported for a fertilizer project could not be given the benefit of 98.01(6) even if the argument of the appellants that the said heading was not only on the statute Book but in full force at the time of importation, was accepted. 51. In view of my observations as above, the appeal would fail on these counts and it was a question arises whether it was necessary to go into other aspects? I consider that it was necessary to consider the following aspects as well before parting. That at the time of importation the bill of entry was filed for merit assessment of individual items and after such an assessment the goods were cleared on payment of duty, albeit under protest. The application for registration under 98.01 was subsequently rejected by Asstt. Collector. As such the Customs Officers had no occasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s apparently this possibility which has caused this reference; and the referring Bench (by virtue of Hon'ble Member (T) - Shri Jain's observations) has in particular indicated this possibility and sought Larger Bench's opinion precisely on this point. Therefore, I am of the opinion that it was necessary on the part of the Larger Bench to record its observations with reference to this preposition. 55. In this respect I consider that great emphasis was required to be placed on the word 'specified project' i.e. it was required to be seen whether the project or plant with reference to which the goods were being imported is specified in the Heading 98.01 or a notification issued under that heading. Once this basic requirement is met then it was immaterial whether the imported goods were used in or in relation to any one or more than one of the units of such specified projects) or plant(s); and it was also immaterial whether such a unit or units (whether in existence or proposed) were located at one or different places. 56. The basic idea or intention behind the import project appeared to me to extend the benefit of concessional rate of duty in respect of the type of machinery and eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Shri N.K. Bajpai, although on different grounds and for different reasons, that the appeal is liable to be rejected. I also agree that the appeal gets disposed of in answering the references and stands dismissed. 60. Order per : K.S. Venkataramani, Member (T)]. - I have had the benefit of going through the orders recorded by learned Member (Technical) Shri Bajpai concurred with by the Hon'ble President as well as the order recorded by Hon'ble Vice President. My view is that the existence of a contract for the import of the consignments and the registration thereof in the Custom House prior to clearance is a SINE QUA NON for classification under Heading 98.01 CTA as has been brought out by learned Member (Technical) Shri Bajpai in his order. The Madras High Court decision relied upon by him and quoted at P-14 of his order clearly indicates this and in para 8 of the decision the High Court has also cited the rationale behind the creation of the erstwhile Heading 84.66 by quoting from the Finance Minister's speech explaining the background for introducing this item in the Tariff as follows : "There have been complaints that the import of equipment by project is impleaded as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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