M/s. Shriram Vinyl and Chemical Industries Vs. Commissioner of Customs, Mumbai
EmailAppeal: Civil Appeal No. 3940 of 1988
(From the Judgment and Order dated 9.1.98 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in A. No. C/2965/89 in O.No.C/54 of 1998)
(From the Judgment and Order dated 9.1.98 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in A. No. C/2965/89 in O.No.C/54 of 1998)
Petitioner: M/s. Shriram Vinyl and Chemical Industries
Respondent: Commissioner of Customs, Mumbai
Apeal: Civil Appeal No. 3940 of 1988
(From the Judgment and Order dated 9.1.98 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in A. No. C/2965/89 in O.No.C/54 of 1998)
(From the Judgment and Order dated 9.1.98 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in A. No. C/2965/89 in O.No.C/54 of 1998)
Judges: S.P. BHARUCHA, N. SANTOSH HEGDE & Y. K. SABHARWAL, JJ.
Date of Judgment: Mar 20, 2001
Appearances:
Mr. V. Lakshmikumaran, Mr. C.L. Narasimhan, Mr. V. Balachandran, Advocates for the Appellant.
Mr. Soli J.Sorabjee, Attorney General, Mr. Dhruv Mehta and Mr. B. Krishna Prasad, Advocates with him for the Respondent.
Head Note:
CUSTOMS
Customs Act, 1962
Section 25 – Exemption notification – Interpretation of – Exemp-tion notification dated 1.3.1986 providing for lower rate of duty in respect of imported parts used in assembly of furnaces – Appellant company dismantling its factory and then assembling modernised furnaces partly using imported parts, partly indige-nously procured parts and partly serviceable parts recovered from dismantled factory – DGTD certifying the appellant to be entitled to avail the lower rate of duty in terms of notification dated 1.3.1986 – Department, however, not granting benefit under said notification – Departmental action upheld by Tribunal – Validity – Whether the term ‘assembled’ used in the notification means only initial setting up – Whether a new article has to come into existence to avail the benefit. Held ‘assembled’ has been used as opposed to ‘dismantled’. It cannot be construed to mean a new article. Notification ought to be construed reasonably and ra-tionally. Thus construed appellant would be entitled to the benefit under the notification.
Held:
The language of the notification is clear and plain. The notifi-cation is to be construed reasonably and rationally and not in a manner which deprives the benefit thereof. The expression ‘assem-bly’ in the context and setting in which it has been used cannot be construed to mean bringing into of new article. This expres-sion 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 indige-nous parts with the imported parts. Thus, the appellants are clearly entitled to the benefit of the notification. (Para 2)
JUDGEMENT:
Y.K. SABHARWAL, J.
1. 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 Ist 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 few furnace emerges in the assembly operation undertaken by them. The Tribun-al, in the order under challenge, affirming the order of Collec-tor of Customs of Appeals states:
“The furnace from which the unserviceable parts were discarded, serviceable parts were reused 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 speci-fied articles. A harmonious reading of these expressions will clearly establish that what is required is the setting up, assem-bly 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 modernisa-tion 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 differ-ent 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 Sec-tion 25 of the Customs Act, 1962 (52 of 1962), and in superses-sion 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 corre-sponding entry in column (3) of the said Table.”
2. The main ground on which the benefit of the aforesaid notifi-cation 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 the 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 a new article coming into existence, the question of claiming benefit under the no-tification 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 new article. This expression cannot be equated with the ex-pression ‘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 contem-plate 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.
3. 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.
1. 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 Ist 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 few furnace emerges in the assembly operation undertaken by them. The Tribun-al, in the order under challenge, affirming the order of Collec-tor of Customs of Appeals states:
“The furnace from which the unserviceable parts were discarded, serviceable parts were reused 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 speci-fied articles. A harmonious reading of these expressions will clearly establish that what is required is the setting up, assem-bly 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 modernisa-tion 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 differ-ent 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 Sec-tion 25 of the Customs Act, 1962 (52 of 1962), and in superses-sion 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 corre-sponding entry in column (3) of the said Table.”
2. The main ground on which the benefit of the aforesaid notifi-cation 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 the 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 a new article coming into existence, the question of claiming benefit under the no-tification 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 new article. This expression cannot be equated with the ex-pression ‘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 contem-plate 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.
3. 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.
