M/S Gammon India Ltd.
Vs. Commissioner of Customs, Mumbai
J U D G M E N T
D.K. JAIN, J.:
1.
This
Civil Appeal, under Section 130E(b) of the Customs Act, 1962 (for short
"the Act"), is directed against order dated 4th April, 2003 passed by
the Customs, Excise and Gold (Control) Appellate Tribunal, as it then existed, (for
short "the Tribunal"), in Appeal No. C/298/02 Mum. By the impugned order,
the Tribunal has allowed the appeal preferred by the Commissioner of Customs,
Mumbai, holding that the appellant is not entitled to claim the benefit of
Exemption Notification No. 17/2001/Cus (General Exemption No. 121), issued by the
Min istry of Finance, Government of India on 1st March, 2001.
2.
Briefly
stated, the facts, material for adjudication of the issue arising in this
appeal, are as follows: The appellant namely, M/s Gammon India Ltd. (for short "Gammon")
and one M/s Atlanta Infrastructure Ltd., Mumbai, (for short "Atlanta")
both incorporated as Public Limited Companies, entered into a joint venture
agreement on 18th September, 2000. The joint venture was named and styled as
"Gammon Atlanta JV".
The agreement was
entered into for the purpose of submitting a bid to the National Highways
Authority of India (for short "NHAI") for award of a contract for
construction of 31.40 Kilometers of road on National Highway. The terms of the agreement,
interalia, provided that: each of the said parties would share financial
responsibilities in the form of guarantees, securities etc. to the extent of
50% of the project value; the venture would be managed by setting up of a
management board consisting of a Chairman and one Director to be nominated by
Gammon and a Joint Chairman and another Director to be nominated by Atlanta. Although
Gammon was to be designated as the lead partner to the venture but both the companies
were to be jointly and severally liable to NHAI for due execution of the
contract.
3.
3.
The bid tendered by the said joint venture was accepted by NHAI and an agreement
dated 20th December, 2000 was executed between NHAI, referred to as the
"Employer" on the one part and M/s Gam 2 mon Atlanta JV, referred to
as the "contractor", on the other part. On behalf of Gammon Atlanta
JV, the agreement was signed by the representatives of both the companies, i.e.
Gammon and Atlanta.
4.
On
1st March, 2001, in exercise of the powers conferred by subsection (1) of Section
25 of the Act, the Central Government, issued the afore noted Exemption Notification,
inter alia, exempting the goods of the description specified in Column (3) of
the Table given there under, read with the relevant List appended thereto and
falling within the Chapter, Heading no. or subheading no. of the First Schedule
to the Customs Tariff Act, 1975, as specified in the corresponding entry in Column
(2) of the said Table. Serial No. 217 of the said Table granted full exemption
from basic Customs duty and additional Customs duty, on the goods falling under
Chapter 84 specified in List 11, required for construction of roads. However, the
said exemption was subject to certain conditions, enumerated in the said
notification. Condition No. 38, relevant for this case, reads as follows: "
If, (a) the goods are
imported by (i) the ministry of Surface Transport, or (ii) a person who has been
awarded a contract for the construction of roads in India by or on behalf of
the Ministry of Surface Trans port, by the National Highway Authority of India,
by the Public Works Department of a State Government or by a road construction 3
corporation under the control of the Government of a State or Union Territory;
or (iii) a person who has been named as a sub contractor in the contract referred
to in (ii) above for the construction of roads in India by or on behalf of the Ministry
of Surface Transport, by the National Highway Authority of India, by Public
Works Department of a State Government or by a road construction corporation under
the control of the Government of a State or Union Territory; (b) the importer,
at the time of importation,
furnishes an undertaking
to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs,
as the case may be, to the effect that he shall use the imported goods exclusively
for the construction of roads and that he shall not sell or otherwise dispose of
the said goods, in any manner, for a period of five years from the date of
their importation; and (c) in case of goods of serial nos. 12 and 13 of List
11, the importer, at the time of importation of such goods, also produces to
the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as
the case may be, a certificate from an officer not below the rank of a Deputy
Secretary to the Govern ment of India in the Ministry of Surface Transport (Roads
Wing), to the effect that the imported goods are required for construction of
roads in India."
5.
It
appears that the appellant approached NHAI for issue of the certificate, as
contemplated in para (c) of Condition no.38, for import of one `Concrete batching
plant 56 cum/hr' covered under Item No. 13 of List 11, referred to at Serial
No. 217 in the said Exemption Notification. Vide letter dated 3rd August, 2001
NHAI forwarded a Certificate, issued by the Deputy Secretary, Government of India,
Ministry of Road Transport and Highways, addressed to the Assistant Commissioner
of Customs, Mumbai, certifying that the said equipment was required for
construction of roads and recommending its duty free import.
6.
6.
Equipped with the said certificate, Gammon, the appellant herein, imported the
specified Concrete Batching Plant from Germany and filed Bill of Entry (for
home consumption) for its clearance at `nil' rate of duty under Notification No.17/2001cus,
dated 1st March, 2001. The Deputy Commissioner of Customs, by his order dated 5th
October, 2001 rejected the claim of the appellant for exemption from payment of
Customs duty on the ground that the appellant had failed to comply with the
conditions stipulated at Serial No. 38 appended to the exemption notification.
According to the
Adjudicating Authority, as per the said condition, the exemption is available
only if the goods are imported by "a person who has been awarded the contract"
by NHAI for construction of roads in India by or on behalf of Ministry of
Surface Transport, but in the present case the goods have been imported by Gammon
to whom no contract had been awarded by the authorities specified in the
notification. Admittedly, the contract had been awarded in the name of joint
venture M/s Gammon Atlanta JV. Thus, the adjudicating authority came to the
conclusion that the appellant was not entitled to the benefit of exemption
notification in their capacity as a partner in the joint venture, to whom the
contract had been awarded.
7.
Aggrieved
thereby the appellant preferred an appeal to the Commissioner of Customs (Appeals).
The Commissioner (Appeals) was of the view that Gammon having been nominated as
the lead partner in the joint venture for due performance of the contract awarded
by NHAI, with authority to incur liabilities and to receive instructions for and
on behalf of the joint venture, and the machine having been imported on behalf
of the joint venture for the purpose of road construction, the benefit of the
said exemption notification could not be denied to the appellant.
Interalia, observing that
the appellant was not an outsider and perhaps due to some technical reasons the
machine had been imported in the name of the appellant, the Commissioner held that
outright denial of the benefit of the said notification was not war ranted. Accordingly,
he allowed the appeal.
8.
8.
Being dissatisfied with the decision of the Commissioner (Appeals), the revenue
carried the matter in further appeal to the Tribunal. As afore stated, by the
impugned order the Tribunal has allowed the said appeal. Distinguishing the
case of New Horizons Limited & Anr. Vs. Union of India & Ors.1, relied
on behalf of the importer, the Tribunal 1 (1995) 1 SCC 478 has come to the
conclusion that the benefit of Exemption Notification cannot be availed of by a
joint venture because it is nothing more than an association of two persons,
having no identity in law.
The Tribunal has gone
on to observe that had such a bill of entry been filed even by a joint venture,
the department would have been justified in rejecting it on the ground that the
identity of the real importer was not known. Aggrieved, Gammon is before us in
this appeal.
9.
We
have heard learned counsel for the parties.
10.
10.
Mr. J.S. Sinha, learned counsel appearing on behalf of the appellant, strenuously
urged that in light of the decision of this Court in the case of New Horizons (supra),
wherein the concept of a joint venture has been explained and the same has been
subsequently followed in Ganpati RV Talleres Alegria Track Private Limited Vs. Union
of India & Anr.2, the view taken by the Tribunal is clearly erroneous.
It was contended that
since a joint venture is a legal entity with all the trap pings of a
partnership under the Indian Partnership Act, 1932, the general principles of
the said Act were applicable to the joint venture and, therefore, any one of
the two partners of the joint venture, viz. Gam mon and Atlanta was competent
to import the subject machinery for and on behalf of the contractor viz. the
joint venture for execution of 2 (2009) 1 SCC 589 the road project under
contract between the joint venture and NHAI. It was argued that the eligibility
certificate dated 3rd August 2001, issued by the Ministry of Road Transport and
Highways, stating that the sub ject machine would be imported by the appellant
herein, will sustain the eligibility of the joint venture in view of the law
laid down by this Court in New Horizons (supra).
It was submitted that
in view of an inclusive definition of the word "person" in the Export
and Import policy for the years 19972002, which includes a "legal
person", the import of machinery by the appellant for and on behalf of the
joint venture is as good as an import by the joint venture who has been awarded
the contract for construction of roads, thus fulfilling condition No.38 of the
Exemption Notification. Learned counsel asserted that since in identical fact situations
in the cases of IVRCL Infrastructures & Projects Ltd. Vs. C.C., Chennai (Sea)3
and Techni Bharathi Ltd. Vs. Commissioner of Customs, MumbaiII4, when machinery
for a road project was imported by one of the constituents' of the joint
venture, the benefit of the same Exemption Notification had been granted by the
Tribunal.
It was argued that
the said orders of the Tribunal having been accepted by the revenue, it cannot
be permitted to take a different stand on the same point in the case of the
appellant. Lastly, relying on the decision of this Court in Commissioner of Cus3
2004 (166) E.L.T. 447 (Tri.Del.)4 2006 (198) E.L.T. 33 (Tri.Bang.) 8 toms
(Preventive), Mumbai Vs. M. Ambalal & Co.5, learned counsel submitted that
a beneficial and promotional exemption notification has to be construed
liberally.
11.
Per
contra, Mr. Harish Chander, learned senior counsel appearing on behalf of the revenue,
supporting the decision of the Tribunal, submitted that the joint venture and
Gammon being two independent entities, the eligibility certificate dated 3rd August,
2001 issued in favour of the latter was of no consequence in so far as the
Exemption Notification was concerned because the contract for construction of roads
had not been awarded to Gammon, who had imported the machine but to the joint
venture.
It was stressed that
Gammon, on their own, were not entitled to import any goods for the execution
of road works under the contract awarded to the joint venture by NHAI. Placing
reliance on the decision of this Court in Novopan India Ltd., Hyderabad Vs.
Collector of Central Excise & Customs, Hyderabad6, learned counsel
contended that the Exemption Notification has to be construed strictly. Responding
to the allegation of pick and choose policy adopted by the revenue, learned
counsel urged that nonfiling of an appeal in a similar case does not operate as
a bar for the revenue to prefer an appeal in another case. In support, learned counsel
5 (2011) 2 SCC 74: 2010 (260) E.L.T. 487 (S.C.)6 1994 Supp (3) SCC 606 9 commended
us to the decision of this Court in C.K. Gangadharan & Anr. Vs. Commissioner
of Income Tax, Cochin7. It was thus, assert ed that the decision of the
Tribunal did not warrant any interference and the appeal deserved to be
dismissed.
12.
The
short question for determination is whether import of the speci fied machine by
Gammon can be considered to be an import "by a person who has been awarded
a contract for construction of the roads in India", so as to fulfill Condition
No.38, laid down in Exemption Notification No.17/2001/Cus dated 1st March,
2001?
13.
In
order to appreciate the contentions advanced on behalf of the par ties on the
question in issue, it would be expedient and useful to once again notice the salient
features of agreement dated 18th September, 2000 entered between Gammon and
Atlanta.
14.
14.
Agreement dated 18th September, 2000 provided that: financial re sponsibilities
of each of the parties to be shared equally in the form of guarantees, securities,
etc. of the joint venture would be 50% of the project value; the Management of
the joint venture would be subject to the overall control of the Management Board,
consisting of a Chair man, to be nominated by Gammon, a Joint Chairman to be
nominated by Atlanta and one Director each to be appointed by both of them; 7
(2008) 8 SCC 739 : (2008) 228 ELT 497 joint venture bank account would be
operated under joint signatures of the authorized representatives of Gammon and
Atlanta and neither party would be entitled to borrow for or on behalf of the
joint venture or to acknowledge any liability without express prior consent in
writing of the other party except to the extent of its share of work;
Gammon being most
experienced party would be the lead partner of the joint venture for the
performance of the contract; the partner in charge would be authorized to incur
liabilities and to receive instructions for and on behalf of the partners of
the joint venture, whether jointly or severally, and entire execution of the
contract including receiving payment would be carried out exclusively through
the partner in charge but any financial commitment required by the lead
partner, on behalf of the joint venture, would always be previously discussed
and agreed upon by the parties. As stated above, though under agreement dated 18th
September, 2000, Gammon was notified as the lead partner but agreement dated
20th December, 2000 executed between NHAI as the "employer" and Gammon
Atlanta JV as "contractor" was signed by the representatives of both
the companies viz. Gammon and Atlanta, meaning thereby that so far as NHAI was
concerned, for them the contractor was Gammon Atlanta JV and not Gammon or
Atlanta individually.
15.
According
to the adjudicating authority, it was clear from both of the said agreements
that the contract of construction of roads in India was awarded to the joint
venture and, therefore, Gammon was not entitled to avail of the benefit of the
Exemption Notification as an independent entity. On the contrary, the
Commissioner (Appeals) allowed the ben efit of the Exemption Notification to
the appellant on the ground that the Exemption Notification should be given a
liberal interpretation and that the revenue should not try to take advantage of
ignorance of law and procedure on the part of Gammon.
It is the Tribunal
which has dealt with the issue in detail by taking into consideration certain
factual aspects pertaining to the import of machine like placement of the supply
orders by Gammon and not by the joint venture and its payment by Gammon from
its own account and not from the joint venture account provided for in the joint
venture agreement. Rejecting the plea of the appellant that in light of the
decision of this Court in New Horizons (supra) wherein it has been held that a
joint venture is a le gal entity in the nature of a partnership, the import of
the machinery by Gammon is to be considered as having been done on behalf of
the joint venture, the Tribunal has allowed revenue's appeal.
16.
Since
the stand of the appellant is that the issue arising in the present appeal
stands concluded in their favour by the decision of this Court in 1 New
Horizons (supra) and a subsequent decision of this Court as also of the Tribunal,
in which the said decision has been relied upon, it would be necessary to
discern the ratio of the decision in New Hori zons (supra).
17.
In
New Horizons (supra), a joint venture company, consisting of a few Indian companies
(with 60% share capital) and a Singapore based company (with 40% share
capital), had participated in tender proceedings floated by the Department of Telecommunications
for printing and binding of telephone directories of Delhi and Bombay. The tender
submitted by New Horizons Ltd; (for short "NHL") was not accepted by
the tender evaluation committee, apparently, on the basis of the fact that the
successful party had more technical experience than any one of the constituent
companies of NHL.
Aggrieved by the said
decision, NHL filed a writ petition in the Delhi High Court against the decision
of the Department of Telecommunications. The said writ petition was dismissed
rejecting the plea of the NHL that the technical experience of the constituents
of the joint venture was liable to be treated as that of the joint venture. NHL
brought the matter to this Court. Explaining the concept of joint venture in
detail, it was held that a joint venture is a legal entity in the nature of a
partnership engaged in the joint undertaking of a particular transaction for mutual
1profit or an association of persons or companies jointly undertaking some
commercial enterprise wherein all contributed assets and shared risks.
It was observed that
a joint venture could take the form of a Corporation wherein two or more
persons or companies might join together. Accordingly, the appeal of NHL was
allowed and it was held that it was a joint venture company in the nature of a
partnership between the Indian group of companies and Singapore based company which
had jointly undertaken the commercial venture by contributing assets and
sharing risks.
Applying the
principle of "lifting the corporate veil", it was held that the joint
venture companies' technical experience could only be the experience of the
partnering companies and the technical experience of all constituents of NHL was
liable to be cumulatively reckoned in the tender proceedings and any one of the
constituents was competent to act on behalf of the joint venture company. Highlighting
the concept of joint venture, the Court observed thus: "24. The expression
"joint venture" is more frequently used in the United States. It
connotes a legal entity in the nature of a partnership engaged in the joint undertaking
of a particular transaction for mutual profit or an association of persons or companies
jointly undertaking some commercial enterprise wherein all contribute assets and
share risks.
It requires a community
of interest in the performance of the subject matter, a right to direct and
govern the policy in connection therewith, and duty, which may be altered by
agreement, to share both in profit and losses. (Black's Law Dictionary, 6th Edn.,
p. 839) 1 According to Words and Phrases, Permanent Edn., a joint venture is an
association of two or more persons to carry out a single business enterprise for
profit (p.117, Vol. 23). A joint venture can take the form of a corporation
wherein two or more persons or companies may join together. A joint venture corporation
has been defined as a corporation which has joined with other individuals or corporations
within the corporate framework in some specific undertaking commonly found in oil,
chemicals, electronic, atomic fields. (Black's Law Dictionary, 6th Edn., p.
342)...................."
18.
In
short, New Horizons (supra) recognises a joint venture to be a legal entity in the
nature of a partnership of the constituent companies. Thus, the necessary
corollary flowing from the decision in New Hori zons (supra), wherein the partnership
concept in relation to a joint venture has been accepted, would be that M/s
Gammon Atlanta JV, the joint venture could be treated as a `legal entity', with
the character of a partnership in which Gammon was one of the constituents. In that
view of the matter, the next question for consideration is whether being a
legal entity i.e. a juridical person, the joint venture is also a "person"
for the purpose of Condition No.38 of the Exemption Notification, stipulating that
the goods should be imported by "a person" who had been awarded a
contract for construction of goods in India by NHAI?
19.
In
support of his submission that the joint venture is a "person" as contemplated
in the Exemption notification, learned counsel for Gammon had relied on the
definition of the word "person" as given in para 3.37 of the Export
and Import policy for the year 19972002. It reads thus: "3.37"Person"
includes an individual, firm, society, company, corporation or any other legal
person".
20.
The
argument was that since a joint venture has been declared to be a legal entity
in New Horizons (supra), it squarely falls within the am bit of the said
definition of the word "person". We are of the opinion that even if the
stated stand on behalf of the appellant is accepted, mercifully, on stark facts
at hand, it does not carry their case any further. Neither was it the case of
the appellant either before the Adjudicating Authority or before the Appellate
Authority or before us, nor is it suggested by the documents viz. the supply
order or the bill of entry, that the import of the machine was by or on behalf
of the joint venture.
On the contrary, the
Tribunal has recorded in its order that when questioned, learned counsel for
the appellant clarified that correspondence with the supplier of goods and
placement of order had been done by Gammon and not by the joint venture or on their
behalf. He also ad mitted that payment for the machine had not been made from
the joint venture account, which had been provided for the contract but from the
funds of Gammon.
21.
Thus,
the inevitable conclusion is that import of "Concrete batching plant 56
cum/hr" by Gammon cannot be considered as an import by M/s GammonAtlanta
JV, "a person" who had been awarded contract for construction of the
roads in India and therefore, neither Gammon Atlanta JV nor Gammon fulfill the
requisite requirement stipulated in Condition No.38 of the Exemption
Notification No. 17/2001/Cus dat ed 1st March, 2001.
22.
As
regards the plea of the appellant that the Exemption Notification should
receive a liberal construction to further the object underlying it, it is well
settled that a provision providing for an exemption has to be construed strictly.
In Novopan India Ltd. (supra), dealing with the same issue in relation to an exemption
notification, a threeJudge Bench of this Court, stated the principle as
follows: "16. We are, however, of the opinion that, on principle, the decision
of this Court in Mangalore Chemicals and in Union of India v. Wood Papers referred
to therein represents the correct view of law.
The principle that in
case of ambiguity, a taxing statute should be construed in favour of the
assessee assuming that the said principle is good and sound does not apply to the
construction of an exception or an exempting provision; they have to be
construed strictly. A person invoking an exception or an exemption provision to
relieve him of the tax liability must establish clearly that he is covered by the
said provision. In case of doubt or ambiguity, benefit of it must go to the State.
This is for the reason explained in Mangalore Chemicals and other decisions, viz.,
each such exception/exemption increases the tax burden on other members of the
community correspondingly.
Once, of course, the provision
is found applicable to him, full effect must be given to it. As observed by a
Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave that such a
notification has to be interpreted in the light of the words employed by it and
not on any other basis. This was so held in the context of the principle that in
a taxing statute, there is no room for any intendment, that regard must be had
to the clear meaning of the words and that the matter should be governed wholly
by the language of the notification, i.e., by the plain terms of the exemption."
23.
23.Applying
the above principles, we are of the opinion that since in the instant case the
language of condition No.38 in the Exemption Notification is clear and
unambiguous, there is no need to resort to the interpretative process in order
to determine whether the said condition is to be imparted strict or liberal
construction.
24.
24.
Before parting, we wish to place on record our deep concern on the conduct of the
two Benches of the Tribunal deciding appeals in the cases of IVRCL Infrastructures
& Projects Ltd. (supra) & Techni Bharathi Ltd. (supra). After noticing the
decision of a coordinate Bench in the present case, they still thought it fit
to proceed to take a view totally contrary to the view taken in the earlier
judgment, thereby creating a judicial uncertainty with regard to the
declaration of law in volved on an identical issue in respect of the same
Exemption Notification.
It needs to be emphasised
that if a Bench of a Tribunal, in identical fact situation, is permitted to
come to a conclusion directly opposed to the conclusion reached by another
Bench of the Tribunal on earlier occasion, that will be destructive of the
institutional integrity itself. What is important is the Tribunal as an
institution and not the personality of the members constituting it. If a Bench
of the Tribunal wishes to take a view different from the one taken by the earlier
Bench, the propriety demands that it should place the matter before the President
of the Tribunal so that the case is referred to a larger Bench, for which
provision exists in the Act itself. In this behalf, the following observations
by a three Judge Bench of this Court in Sub Inspector Rooplal & Anr. Vs. Lt.
Governor & Ors.8 are quite apposite:
"At the outset,
we must express our serious dissatisfaction in regard to the manner in which a Coordinate
Bench of the Tribunal has overruled, in effect, an earlier judgment of another Coordinate
Bench of the same Tribunal. This is op posed to all principles of judicial discipline.
If at all, the subsequent Bench of the Tribunal was of the opinion that the earlier
view taken by the Coordinate Bench of the same Tribunal was incorrect, it ought
to have referred the matter to a larger Bench so that the difference of opinion
between the two Coordinate Benches on the same point could have been avoided. It
is not as if the latter Bench was unaware of the judgment of the earlier Bench
but knowingly it proceeded to disagree with the said judgment against all known
rules of precedents. Precedents which enunciate rules of law form the
foundation of administration of justice under our system.
This is a fundamental
principle which every presiding offi cer of a judicial forum ought to know, for
consistency in interpretation of law alone can lead to public confidence in our
judicial system. This Court has laid down time and again 8 (2000) 1 SCC 644 that
precedent law must be followed by all concerned; deviation from the same should
be only on a procedure known to law. A subordinate court is bound by the
enunciation of law made by the superior courts. A Coordinate Bench of a Court cannot
pronounce judgment contrary to declaration of law made by another Bench. It can
only refer it to a larger Bench if it disagrees with the earlier
pronouncement."We respectfully concur with these observations and are
confident that all the Courts and various Tribunals in the country shall follow
these salutary observations in letter and spirit.
25.
In
view of the foregoing discussion, the decision of the Tribunal, holding that
the appellant was not entitled to the benefit of Exemption notification No.
17/2001Cus dated 1st March, 2001, cannot be flawed. The appeal being bereft of any
merit is dismissed accordingly, with costs, quantified at `50,000/.
...........................................J.
(D.K. JAIN, J.)
...........................................J.
(H.L. DATTU, J.)
NEW
DELHI;
JULY
6, 2011.
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