M/S. Shriram
Vinyl & Chemical Industries Vs. Commissioner of Customs, Mumbai [2001] Insc
150 (20 March 2001)
S.P.
Bharucha, N. Santosh Hegde & Y.K. Sabharwal. Y.K.Sabharwal,J.
L.I.T.J
After
dismantling in their factory the existing furnaces, the appellants assembled
modernized furnaces partly using imported parts, partly indigenously procured
parts and partly serviceable components/parts recovered from the dismantled
furnaces. In respect of imported parts used in the assembly of the furnaces,
the appellants claimed benefit of Notification No.155/86-Cus dated 1st March, 1986 which provides for lower rate of
duty. The Director General of Technical Development, as the competent authority
under the notification, recommended the grant of lower rate of duty prescribed
in the notification in respect of the imported parts. The benefit of the
notification has, however, been denied to the appellants on the ground that no
new furnace emerges in the assembly operation undertaken by them. The Tribunal
in the order under challenge affirming the order of Collector of Customs of
Appeals states:
"The
furnace from which the unserviceable parts were discarded, serviceable parts
were re-used along with some of the imported parts and some of the indigenous
parts purchased locally, were not entirely different from the old furnace and
the incorporation of the improvements into them did not make them substantially
new. The expression used in the exemption notifications are `initial setting
up', `assembly' and `manufacture' of the specified articles. A harmonous
reading of these expressions will clearly establish with what is required is
the setting up, assembly or manufacture of a new article which if imported
could have been liable to customs duty and that even if the parts are imported
and not the complete article the same rate of customs duty, as applicable to
complete article will be applicable to such parts. The parts in this case were
not for the initial setting up, assembly or manufacture of a furnace: the modernisation
of the already existing furnace will not amount to the assembly of a furnace
for the purposes of the treatment of such parts as at par with the complete
furnace, had the complete furnace been imported (in place of the parts). The
Collector of Customs (Appeals) had observed that modernisation and assembly for
the purposes of Notification No.155/86-CUS were two different things and that
in case of assembly an entire new product emerges whereas in case of modernisation
certain alterations and modifications are made increasing production efficiency
and reducing costs." The material part of notification reads as under:
"In
exercise of the powers conferred by sub- section (1) of section 25 of the
Customs Act, 1962 (52 of 1962), and in supersession of the notifications of the
Government of India in the Ministry of Finance (Department of Revenue)
Nos.94/86-Customs and 95/86-Customs both dated 17th February, 1986, the Central
Government, being satisfied that it is necessary in the public interest so to
do, hereby exempts parts required for the purpose of initial setting up, or for
the assembly or manufacture, of any article specified in column (2) of the
Table hereto annexed, when imported into India and proved to the satisfaction
of the Assistant Collector of Customs to be so required for such setting up,
assembly or manufacture, from so much of that portion of the duty of customs leviable
thereon which is specified in the corresponding entry in column (3) of the said
Table..." The main ground on which the benefit of the aforesaid
notification has been denied to the appellants is that serviceable parts out of
the dismantled furnace were used besides some indigenous parts along with the
imported parts and, therefore, new furnace has not come into existence.
The
contention of learned counsel for the appellant is that the notification does
not require that a new article must come into existence. We agree. The three
expressions `initial setting up', `assembly' and `manufacture' cannot be
construed to mean same thing. It is evident from the notification that the
expression `assembly' has been separated from the expression `initial setting
up'. These expressions are intended to cover different situations. We are
unable to accept the contention of learned Attorney General that the expression
`assembly' is to take colour from the expression `initial setting up' and,
therefore, without new article coming into existence, the question of claiming
benefit under the notification would not arise.
The
language of the notification is clear and plain. The notification is to be
construed reasonably and rationally and not in a manner which deprives the
benefit thereof. The expression `assembly' in the context and setting in which
it has been used cannot be construed to mean bringing into of a new article.
This expression cannot be equated with the expression `manufacture'. If the
construction as placed by the Tribunal is accepted, it would render the
expression `assembly' in the notification redundant. The expression 'assembly'
has been used as opposed to dismantle. The notification does not contemplate
denial of its benefit on the ground of reuse of certain parts and/or use of
some indigenous parts with the imported parts. Thus, the appellants are clearly
entitled to the benefit of the notification.
As a
result of aforesaid discussion, the impugned order is set aside and the appeal
is allowed. The parties are, however, left to bear their own costs.
Back
