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TMI Blog1997 (5) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2,18,000 tonnes of aluminium per year, a 600 M.W. captive power plant to supply power to Smelter Unit and Port facilities at Visakhapatnam Port (150 KMs away from the refinery) for export of 3,75,000 tonnes of alumina per year and import of 1,46,000 tonnes of Caustic Soda lye per year. The import licence granted to the appellant covers equipment for setting up alumina refinery and equipments required for port facility. The list of goods was endorsed by the licensing authority for "Project Imports". By letter dated 27-4-1985, addressed to the Collector of Customs, Visakhapatnam, the Joint Secretary in the Ministry of Mines and Coals (Department of Mines) recommended grant of facility for the goods to be imported for the Project against import licence. Appellant thereupon applied to the Assistant Collector of Customs for registration of their contracts under the Project Imports (Registration of Contracts) Regulation Act, 1965 with a view to secure the benefit of tariff rate of duty for Project Import under Tariff Heading 84.66 of the Customs Tariff Act, 1975. 3.The dispute in these appeals relates to application of registration of contract for the supply of equipment for the port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Punjab State Electricity Board case and was inclined to hold that port facility at Visakhapatnam cannot be dissociated from the refinery which would be admittedly "an industrial plant" and, therefore, the port facility would fall under Heading 84.66. In this view the Bench referred the case to a Larger Bench. Relevant portion of Chapter Heading 84.66 of the Central Excise Tariff 1975 reads thus :- 84.66 (i) All items of : (A) Machinery including prime movers, (B) Instruments, apparatus and appliances, (C) Control gear and transmission equipment, (D) Auxiliary equipment, as well as, all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified ; Industrial plant, Irrigation project, Power project, Mining project, Project for the exploration for oil or other minerals, and such other projects as the Central Government may, having regard to the economic development of the country, notify in the Official Gazette in this behalf. The dispute in these appeals relate not to other parts of the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject would be eligible for assessment as project import. The very language of the entry would indicate that vehicles3. which are used in the shifting of transformers would not constitute an integral part of the power project and would therefore not attract the provision of entry 84.66. We are, therefore, of the view that the authorities below have rightly construed the entry and we see no reason to interfere with the view taken by the authorities." The above observations make it clear that vehicle was not considered to be an item of auxiliary equipment required for the initial setting up of a unit in a specified power project on the ground that it was used only in shifting transformers which would not constitute an integral part of the power project. We would also like to emphasize certain features of that case. Firstly, transformers had nothing to do with the generation of power but had nexus with the transmission of power. Secondly, vehicle was intended to transport specified number of transformers to sites of sub-stations and the utility of vehicle would be over at the end of such transport and thereafter the vehicle would certainly be used for other purposes of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the former. According to him, the two decisions of the Supreme Court relied on by the appellant were rendered in the context of Central Sales Tax Act and in the light of particular provisions of the Act having nexus with the aspect of sale and have no direct bearing on the dispute at hand. According to him, while due regard may be paid for the presence of items listed in the licence, ultimate decision on the question whether items are covered by particular heading of Customs Tariff is for the customs authorities to take. 7.According to the appellant, project is an integrated project involving mining of aluminium and manufacture of alumina and the project is set up with the intention of selling alumina domestically and to foreign buyers and, therefore, the activity of unloading imported raw materials and loading alumina into ship must be treated as part of the integrated project and in that view the equipment of the mechanised handling system must be treated as auxiliary equipment required for the initial setting up of a unit of a specified industrial plant. Auxiliary means "subsidiary". Auxiliary equipment must mean subsidiary equipment. Subsidiary equipment must be required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial expansion .............. of an industrial plant". There is nothing in the above-quoted words to take in equipment in setting up a unit necessary only for handling raw materials or finished products. 8.In Indian Copper Corporation Ltd., AIR 1965 SC 891, the appellant sought specification in the certificate of registration, inter alia, of locomotives, motor vehicles and their accessories and spare parts, on the ground that the goods were required for mining operations and manufacture of copper. Section 8(1)(b) of the Central Sales Tax Act, 1956 required every dealer, who, in the course of inter-State trade or commerce, sells to a registered dealer other than the Government, goods of the description referred to in sub-section (3) to pay Central Sales Tax at one per cent of his turnover. Section 8(3)(b) of that Act provided that the goods referred to in Section 8(1)(b), in the case of goods other than declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles as are intended to be used for removal of processed goods from the factory to the place of storage —————— the restrictions imposed by the High (Emphasis supplied).Court —— would not be justified." On the basis of the above observations, it is pointed out for the appellant that what is important is the integrated nature of the mining operation and the manufacturing process and vehicles used for removal of ore to the factory and of processed goods from the factory to the place of storage are to be covered by the specification in the registration certificate. We notice that the decision rested entirely on an interpretation of the provisions of Section 8(3)(b) of the Central Sales Tax Act and Rule 13 of the Rules and the application of these provisions to the integral process. The decision related to liability for sales tax of a "dealer" and naturally the emphasis was as much on mining and manufacturing process as the purpose of "sale". It was in this view that the Supreme Court observed that "ordinarily" the phrase may include vehicles intended to be used for removal of processed goods from the factory to the place of storage. Interpretation placed on the language of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration of the appellant. The Supreme Court also held that goods purchased for use in carrying the ore from mining site to the riverside and from there to the harbour cannot be regarded as goods purchased for use in mining but can be regarded as goods purchased for use in processing of ore for sale. The Supreme Court held:- "Where a dealer is engaged both in mining operation as also in processing the mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site mined ore for sale, the two processes being inter-dependent, it would be essential for carrying on the operation of processing that the ore should be carried from the mining site where the mining operation comes to end to the place where the processing is carried on and that would clearly be an integral part of the operation of processing and if any machinery, vehicles, barges and other item of goods are used for carrying the ore from the mining site to the place of processing, they would clearly be goods used in processing of ore for sale. It is obvious that in the present case, the mining of ore is done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of contract, the Import Trade Control Licence together with a statement describing the articles licensed to be imported. In the case of imports by Government agency no licence shall be necessary but there should be list of items for which clearance of DGTD has been taken and a certificate from the head of the Project Authority. According to Clause 4 proper officer being satisfied that the application is in order, may register the contract by entering the particulars thereof in a book kept for the purpose, assign a number in token of the registration and communicate the number to the importer and return the original documents. The provisions in Clause 3 are significant. The particulars to be provided relate to the location of the plant or project, the description of the articles to be manufactured, produced, mind or explored, the installed capacity of the plant or project etc. The Regulations clearly suggest that the registration shall not necessarily follow from Import Trade Control Licence or clearance of the DGTD. Inspite of these documents proper officer has to be satisfied that the application is in order which meant that he has to be satisfied that articles sought to be imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". A copy of the attached list is not produced. We cannot proceed on the basis that the licence specifically covers equipment for Port facility as part of Project Import. Reliance is placed on letter dated 27-4-1985 of the Joint Secretary in the Department of Mines (G.O.I.) informing the Collector of Customs, Visakhapatnam that appellant was importing "Wagon Haulage System" as per contract under import licence dated 22-3-1983 for initial setting up of a Composite Aluminium Complex comprising of Mines, Alumina Plant, Aluminium Smelter, Port facilities and Captive Power Plant in Orissa, certifying that the materials covered under the attached list were essential for Port facilities project and requesting concessional duty for project import may be allowed in public interest for the said imports under Heading 84.66 etc. The attached list refers to three numbers of single or double drum reversible railway wagon haulage equipment etc. We are told that these goods are actually equipment for Port facility. The department of mines might have taken a view that these goods are importable as part of Project Import and desired clearance at concessional rate of duty available for Project Import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IE informed appellant that the transfer of imported machinery had already been noted by his office. Appellant applied to proper officer for registration of contract under 1965 Regulations and also filed Bill of Entry. The goods were cleared on payment of concessional rate of duty. This was followed by show cause notice alleging non installation of the machinery in the appellant's premises and non utilisation of the same for the substantial expansion of the factory as claimed in the application for registration of contract and suppression of facts in order to secure concessional duty as project import and demanding differential duty and proposing imposition of penalty. The Collector of Customs passed order of adjudication against the appellant. A contention was raised before the Supreme Court relying on the licence and endorsement by Deputy CCI&E to the effect that Customs Authority could not take action for breach of condition of licence. It was noticed that appellant had not informed the Customs Authority before the clearance about the transfer of machinery to the company. The Supreme Court held :- "The office of the Deputy Chief Controller of Imports and Exports had no role to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be imported with reference to the eligibility for concession under Item 72A. Para 6 proceeded to state that when licences seeks registration of the contract, the custom authorities shall compare the contract with the proforma invoice received by them from the licensing authority and if there is no variation between the two, such contract shall be registered by the customs authorities and if there is a variation, the matter has to be examined. The Board further indicated that normally it is expected that all goods which are so scrutinised and licenced would be eligible for the benefit of Item 72A assessment and the customs authorities will be normally free to deny assessment to such of the items covered by the licence and the attested proforma invoice which, in their opinion, are clearly and patently outside the scope of Item 72A. The circular emphasised the weight to be attached to the licence and also instructed the customs authorities to examine the entire matter in the light of the tariff entry. Thus, the Board's circular relied on is of no assistance to the appellant. 18.We have adverted to all the contentions urged by the appellant and found the same unsustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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