of Customs, Mumbai Vs. M/S. Toyo Engineering India Limited  Insc 556 (31 August 2006)
Bhan & Markandey Katju Bhan, J.
has filed this appeal against the final Order No. 1813/2000-B dated 25.10.2000
in Appeal No. C/164/89-B2 passed by the Customs, Excise and Gold (Control)
Appellate Tribunal (for short "the Tribunal") whereby the Tribunal
has set aside the order in original as well as the order passed in the appeal
and held that the machinery and equipment imported by the assessee-respondent
was classifiable under Heading 98.01 of the First Schedule to the Customs
Tariff Act, 1975 (for short "the Tariff Act") and granted the benefit
of Project Import under the Project Import Regulation to the assessee.
(for short "the respondent") is engaged in the setting up of
industrial unit such as fertiliser plant. M/s. Indian Farmers Fertilisers
Cooperative Ltd. entered into a contract with their parent Company M/s. Toyo
Engineering Corporation, Japan for designing, engineering,
fabricating and commissioning an Ammonia Storage Package Unit and a
Co-generation Plant. Their Parent Company in turn entered into an agreement
with the respondent to carry out all the works, services, erection and
commissioning of the project on turn key basis. The respondent filed an
application on 17.03.1986 with the Contract Registration Cell for grant of the
benefit under the Project Import Scheme read with Notification No. 72/85-Cus.,
dated 17.03.1985 in respect of goods sought to be imported. Respondent has
imported various special construction equipments, available at their overseas
project at Kuwait, and filed eleven Bills of entry in
March, 1986 for the clearance of goods, which were cleared on payment of duty
Assistant Collector, under Adjudication Order No. S/5-Misc. 376/86-CC, dated
18.08.1987, rejected the request of the respondent for registration under the
Project Import Regulation on the ground that the imported goods are the
property of the respondent and even after execution and completion of the work,
these goods would remain the property of the respondent and the ownership of
the imported goods would not pass on to the Project Authority. It further held
that as the goods could be used for other work elsewhere after the completion
of the present project, the imported goods would not qualify for classification
under Heading 98.01 of the Tariff Act.
aggrieved, the respondent filed an appeal before the Appellate Authority which
was rejected. It was held that as per Heading 98.01 of the Tariff Act the 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 the setting up of the unit or
its substantial expansion. As the respondent could utilise the machinery
elsewhere in the setting up of other plants, the impugned goods could not be
classified under Heading 98.01 of the Tariff Act.
respondent being aggrieved filed an appeal before the Tribunal which has been
accepted by the impugned order.
Tribunal held that the grounds on which both the lower authorities have denied
the facility of project import to the respondent were not sustainable in law.
After detailed discussion the Tribunal set aside each of the findings recorded
by the appellate authority and held that the respondent would be eligible to
the benefit asked for.
98.01 of the Tariff Act reads as under:
"All items of
machinery including prime movers, instruments, apparatus and appliances, control
gear and transmission equipment, auxiliary equipment (including those required
for research and development purposes, testing and quality control), 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:
Project for the
exploration for oil or other minerals, and
projects as the Central Government may, having regard to the economic
development of the country notify in the Official Gazette in this behalf; and
spare parts, other raw materials (including semi-finished material), or
consumable stores not exceeding 10% of the value of the goods specified above
provided that such spare parts, raw materials or consumable stores are
essential for the maintenance of the plant or project mentioned in (1) to (6)
above." Heading 98.01 covers all the items of machinery including prime
movers, instruments, apparatus and appliances; control gear and transmission
equipment, auxiliary equipments besides components and raw materials required
for the initial setting up of a unit or the substantial expansion of an existing
unit of specified industrial plant.
industrial plant would include fertiliser plant as well, as it is designed to
be employed directly in the performance of processes necessary for manufacture
of fertiliser. Since the fertiliser plant is covered by the industrial plant
specified in Heading 98.01 of the Tariff Act all the "auxiliary
equipments" which are required for the initial setting up of the unit
could be imported under the Project Import Scheme.
Words and Phrases of Excise and Customs by S.B. Sarkar "auxiliary"
additional help; supplemental or subsidiary; an item not directly a part of a
specific component or system but required for its functional operation.
to Black's Law Dictionary, sixth edition, 'auxiliary' means:
attendant on." According to the World Book Dictionary, 'auxiliary' means:
person or thing that helps; aid; syn; accessory".
Encyclopedic Unabridged Dictionary of the English Language, (1996 Edn.) "auxiliary"
support; serving as an aid;
It is not disputed that construction equipments imported by the respondent were
used in the initial setting up of the plant. The Assistant Collector and the
appellate authority denied the facility of the project import as the ownership
of the imported goods would not pass to the project authority and that the
machinery imported could be utilized elsewhere in the setting up of any other
plant. What is required under heading 98.01 Tariff Act is that the machinery imported
should be required "for the initial setting up of a unit, or the
substantial expansion of an existing unit". This heading specifically
mentions and includes "auxiliary equipment". The "auxiliary
equipment" has not been defined under the Tariff Act. As per Dictionary
meaning, extracted above, it is an equipment which aids or helps. Any equipment
which aids or helps in the setting up of an industrial plant would fall and be
covered under heading 98.01 of the Tariff Act. The mere possibility of its being
used subsequently for other project would not debar the respondent from
availing the facility of project import. If the contention of the Revenue is
accepted, then resultant effect as put by the Tribunal would be:
equipment can be imported for projects like Konkan Railway Project, Road
Development Projects of the National Highway Authority of India, etc.
under Heading 98.01 of CTA." We agree with this observation of the
appearing for the appellant strenuously contended that the respondent could not
be given the benefit of the project import under heading 98.01 of the Tariff
Act in view of the decision of this Court in the Punjab State (91) ELT 247 (SC).
not find any substance in this submission. In that case this Court did not
consider the vehicles imported to be an item of auxiliary equipment required
for setting up of an initial unit on the ground that it was used only in
shifting of the transformers which would not constitute an integral part of the
power project. The vehicles imported were required for transportation of the
transformers from railway yards to the erection sites and had no relation to
power generation or power project. After transporting the specified number of
transformers to the site of sub-station the utility of the vehicles would be
over at the end of such transport and thereafter the vehicles could certainly
be used for other purposes of the assessee. That the vehicles, which are used
in the shifting of the transformers, would not constitute integral activity of
the project. In the present case goods imported by the respondent are hydle
truck cranes, excavator, shovel loader, truck, forklift truck, power
generators, diesel welder, welding rectifier, containers tools and tackles
instruments, level Nako with tripod, theodlite nako with accessories &
tripod besides window air conditioners, electric typewriter and camera with
flash (the total cost of last three items is only Rs.70,000/-, which is
negligible). In fact, it was not disputed before the Tribunal or before us as
well that the construction equipments imported by the respondent were used in
the initial setting up of the plant. The goods imported by the respondent such
as hydle truck cranes, excavator, shovel loader, truck, forklift truck, power
generators, diesel welder, welding rectifier, containers tools and tackles
instruments, level Nako with tripod and theodlite nako with accessories &
tripod would certainly be auxiliary equipments which would help in the initial
setting up of the industrial plant. The facility of the project import was
denied to the respondent because the ownership of the imported goods did not
pass to the project authority. Since it is not disputed that the construction
equipments imported by the respondent were used in the initial setting up of
the plant, then, as per the provisions of heading 98.01 of the Tariff Act the
respondent could not be denied the benefit of the project import.
the Tribunal learned departmental representative appearing for the Revenue had
made various other submissions such as
that absence of
a contract specifically registered for import of construction material;
that note (2) to
Chapter 98 according to which Heading 98.01 would apply to goods which are
imported in accordance with the Project Imports Regulations, 1986;
Regulation 4 the assessment under Heading 98.01 shall be available only to
those goods which are imported against one or more specific contract which have
been registered with the appropriate Customs House. In the absence of a
specific contract being registered Heading 98.01 would not be applicable to the
impugned goods imported by the respondent; and
that the benefit
of concessional duty under Project Import was not available if the goods had
arrived before the application was submitted for registration of the goods. All
these submissions were not allowed to be raised by the tribunal as these
submissions had been made for the first time before the Tribunal. These
submissions had neither been raised before the adjudicating authority nor the
first appellate authority. It was held by the Tribunal that the Department
could not be allowed to make out a new case at the appeal stage.
counsel for the Revenue tried to raise some of the submissions which were not
allowed to be raised by the Tribunal before us, as well. We agree with the
Tribunal that the revenue could not be allowed to raise these submissions for
the first time in the second appeal before the Tribunal.
adjudicating authority nor the appellate authority had denied the facility of
the project import to the respondent on any of these grounds. These grounds did
not find mention in the show cause notice as well. The Department cannot be
travel beyond the show cause notice. Even in the grounds of appeals these
points have not been taken.
the reasons stated above, we do not find any merit in this appeal. We agree
with the findings recorded by the Tribunal. Accordingly, the appeal is
dismissed, leaving the parties to bear their own costs.