Rubber Limited Vs. Union of India & ANR  INSC 682 (26 August 1997)
C. SEN, K.T. THOMAS
26TH DAY OF AUGUST, 1997 Present:
Mr. Justice Suhas C. Sen Hon'ble Mr. justice K.T. Thomas Joseph Vellapally, Sr.
Adv., Ms. Amrita Mitra and Amit Bansal, Advs. with him for M/s. JBD & Co.
for the appellant R.Mohan, Sr. Adv., R.S. Rana, V.K. Verma and P. Parmeswaram
Advs. with him for the Respondents
following Judgment of the Court was delivered:
Rubber Limited, the appellant herein, set up a tyre and tube manufacturing
plant in 1974. it had a collaboration agreement with a West German Company
(hereinafter referred to as "foreign collaborators") who agreed to
supply the latest technical know how and also to guide the appellant in the
manufacture of high quality tyres. Some machineries and its components were
also supplied by the foreign collaborators. The dispute in this case relates to
Polypropylene Liner Fabric (PPLF). According to the appellant, PPLF was supplied
by the foreign collaborators for use as Liner components to various machinery
units. PPLF is basically a linear Fabric which protect the rubber coated tyre
fabric from atmospheric moisture and dust. The Liner Fabric is fed into various
machinery units and at each stage, it is rolled with a layer of the Liner
Fabric Component in between. This has the effect of protecting and preserving
the thickness, surface and elongation etc. during the manufacturing process
could not be carried out unless it was used in the various machinery units. It
is not a consumable raw material nor does it form part of the finished products
like automobile tubes and tyres.
behalf of the appellant, it has further been contended that the plant and
machineries imported by it included PPLF as a part thereof and formed part of
"project Import". The appellant's import licence was likewise
endorsed. However, the appellant thought that the capital goods import licence
might not be adequate to cover all the requirements of PPLF for setting up of
the said factory and applied to the Director General, Trade and Development,
for inclusion of PPLF in another import licence for Raw material which was duly
grievance of the appellant is that the Customs Department has levied duty at
the rate of nearly 305 per cent under Item 53 ICT. The only reason for
classifying the goods imported by the appellant under Item 53 ICT was that PPLF
had been imported under a separate and subsequent licence and not under the
project Import licence. The appellant is aggrieved by the levy of duty under
Item 53 ICT on PPLF imported by it. The contention of the appellant is that in
the facts of this case, duty should have been levied under item 72(3) ICT as
component part of the machinery imported by it and not under Item 53 ICT as
"Textile manufactures not otherwise specified". The relevant entries
are as under:
MATERIAL 72(3). Component parts of machinery as defined in item 72, 72(1) and
72(2) and not otherwise specified, namely, such parts only as are essential for
the working of the machine or apparatus and have been given for that purpose
some special shape or quality which would not be essential for their use for
any other purpose but excluding small tools like twist drills and rea mers,
dies and taps, gear cutters and backsaw blades:
that articles which do not satisfy this condition shall also be deemed to be
component parts of the machine to which they belong if they are essential to
its operation and are imported with it in such quantities as may appear to the
Collector of Customs to be reasonable"
Textile manufactures, not otherwise specified." In the revisional order
passed by the Government of India which is now under challenge in this Court,
it was held that the term "component part" as defined under item
72(3) ICT referred to such parts only as were essential for the working of the
machine or the apparatus and had been given for that purpose some shape or
quality which would not be essential for their use for any other purpose. The
appellant in its letter to the Assistant Collector of Customs had itself
described the goods as "accessory" and had stated that;-
"Polypropylene liner fabric is however not a raw material which goes into
the finished product, namely, tyres and tubes." The Government was of the
view that ordinarily "component Part" should go into the assembly of
a machinery itself. The Government of India, thereafter, had elaborately
discussed the functions of PPLF and came to the conclusion that it was more
properly in the nature of an accessory to the equipment. It was further noticed
that perform invoice and the list of machineries supplied, forwarded by the
appellant to DGTD and CCI and E did not indicate that the Liner Fabric was a ' component'.
It was also noted that the fabric imported by the appellant was in running
lengths of different sizes and width. In the form in which they were imported,
these fabrics could not be considered as "component parts" of any
behalf of the appellant, affidavits of some experts were give, Mr. Ram Mohan Rai
and Mr. Waldemar Lange filed affidavits to establish that PPLF imported by the
appellant was " component of machine".
taking into consideration the facts of this case as well as the affidavits, it
was ultimately held that PPLF imported by the appellant could not be treated as
component of the machinery installed by the petitioner.
regard to the facts of the case, we are of the view that no error of law has
been committed in the revisional order. The appellant had imported plants and
machineries. While using the plants and machineries, PPLF was used as a device
to protect the rubber coated tyre fabric from atmospheric moisture and dust.
PPLF was not a component of the machine itself. It was not a constituent a
part. it was used as a Liner Fabric not only in tyre production but also in
similar other industrial processes.
this finding of fact reliance was placed on the affidavits of Shri Ram Mohan Rai
and Shri Waldemar lange where it was stated that PPLF was used as Liner
component of tyre manufacturing machines and in similar other industrial uses.
Item 72(3), it has been categorically stated that the components imported must
have some ' special shape or quality which would not be essential for their use
for any other purpose." The finding of the Tribunal is that PPLF came in
various sizes and forms and not in any particular shape suitable for any
particular machine. Moreover, it could be used not only in the machines imported
by the appellant but also in other similar machines.
regard to the facts of this case, we are of the view that the order under
appeal does not suffer from any infirmity in law. The appeals are dismissed. No
order as to costs.