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Thursday, April 16, 2015

Section 25(1) of the Customs Act-exempted from payment of customs duty and additional duty leviable under the Customs Tariff Act.-Under Notification No.17/2001, that the benefit of duty exemption is available only for the import of the plant in full either in CKD or SKD condition. - The subject import can be considered only as a part of the plant.-Therefore, the goods under import are not eligible for the duty exemption as provided under the Notification No.17/2001.-what was imported was not a hot mix plant but only certain parts of such plant and, therefore, the exemption notification would not apply. -It is settled law that statements made to an Officer of Customs are admissible in evidence under Section 108 of the Customs Act, 1962.In the present case, both the oral evidence and the documentary evidence ultimately lead to the same conclusion: namely, that what was imported was not a hot mix plant that was complete in itself. - But not an unassembled Hot Mix Plant -have no application to an exemption notification which is issued under Section 25 of the Customs Act. - 2015 S.C. MSKLAWREPROTS



The appellant entered into a Joint Venture  Agreement  with  M/s
           Shapoorji  Pallonji  &  Company  Limited  for  the  purpose   of
           construction of roads in the State of Andhra Pradesh.  The Joint
           Venture  was  awarded  a  contract  by  the  National   Highways
           Authority of India for construction of roads as a  part  of  the
           Golden Quadrilateral, Phase-2 Project in Andhra Pradesh.
The description reads  :  "Hot
                 mix plant batch type with electronic controls and bag  type
                 filter arrangement 160 tons per hour capacity."
             Vide a notification dated 1.3.2001, in exercise of  powers
           under Section 25(1) of  the  Customs  Act,  certain  items  were
           exempted from  payment  of  customs  duty  and  additional  duty
           leviable under the Customs Tariff Act.


We  are  concerned  with
           serial No.217 of this notification which reads as follows:

           "217. 84 or any other  Goods specified in List 11  Nil  Nil   38
                 Chapter          required for construction of roads."

The conditions by which the exemption is attracted is set out in
           item 38 as follows:

                 "38.  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  Transport,  by  the   National
                       Highway Authority  of  India,  by  the  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; 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 Government 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."

 List 11 with which we are concerned  contains  several  entries.
           We are concerned with Entry No.1 which reads as follows:

                 "(1) Hot mix plant batch type with electronic controls  and
                 bag  type  filter  arrangements  more   than   120   T/hour
                 capacity."

 The Customs Authorities,  however,  maintained
           that what was imported was not a hot mix plant but only  certain
           parts of such plant and, therefore, the  exemption  notification
           would not apply.
Various representations were then made to  the
           Chief Commissioner of Customs to  allow  the  goods  into  India
           without payment of customs duty.
 On 22.2.2002  the  goods  were
           assessed provisionally and then allowed to be  cleared.   By  an
           order of the same date, the Commissioner of  Customs  held  that
           the exemption notification did not apply for  two  reasons.
  As
           per condition 38 of the said notification, imports  have  to  be
           made by a Joint Venture Company and not by one of  the  partners
           of the said company.   
Secondly,  the  exemption  applies  to  a
           complete plant that is imported and not to  parts/components  of
           such a plant

Shri M.V. Narasimha Rao,  Project
                 Director  of  NHAI,  with  reference   to   the   exemption
                 certificate issued by them, after careful scrutiny  of  the
                 related  import  documents   and   also   the   examination
                 proceedings dated 24.01.2002, has clarified that the  goods
                 under import were not  the  complete  plant  and  that  the
                 imported   components   did   not   have   the    essential
                 characteristics of the plant.

  Under Notification No.17/2001, that  the  benefit  of
                 duty exemption is available only  for  the  import  of  the
                 plant in full either in CKD or SKD condition.  The  subject
                 import can be considered only  as  a  part  of  the  plant.
                 Therefore, the goods under import are not eligible for  the
                 duty  exemption  as   provided   under   the   Notification
                 No.17/2001."
An appeal was carried by the appellant to CESTAT which set
           aside the  Commissioner's  reasoning  on  condition  38  of  the
           notification.
It held that there was in fact  no  Joint  Venture
           Company formed and the Joint Venture between the  appellant  and
           M/s Shapoorji Pallonji & Company Limited was in the nature of  a
           partnership, in which case any  of  the  partners  could  import
           goods covered by the exemption notification.
However, it agreed
           with the Commissioner that what had in fact  been  imported  was
           not a complete plant and, therefore, it would  follow  that  the
           exemption notification would not be  available  on  this  score.
Apex court held that

  All  these  statements  -  none  of  them
                 retracted or controverted - coupled  with  the  documentary
                 evidence would prove beyond doubt that the  goods  imported
                 by  IVRCL  did  not  represent  anything   with   essential
                 character of a hot mix plant, let alone a  complete  plant,
                 to satisfy the description at Item No. (1) of List-11 under
                 the Notification.  Therefore, we are unable to  accept  the
                 counsel's  argument  that  the  imported  goods  should  be
                 treated as 'hot mix plant unassembled.'  What was  exempted
                 from import duty in terms of  Sr.  No.217  read  with  Item
                 No.(1) of list 11 under the Notification was a complete hot
                 mix plant fully described at the said Item No. (1) and  not
                 some  components  thereof.   There  can  be  no  doubt   or
                 ambiguity with regard to the description of  goods  at  the
                 said Item No. (1)."
 The subject matter  before  us  is  an
           exemption notification issued under Section 25  of  the  Customs
           Act, 1962.
The interpretative notes that have been referred  to
           by Shri Lakshmikumaran are in the Customs Tariff Act.
Note 2(a)
           referred to by Shri Lakshmikumaran reads as follows:

                 "2. (a)     Any reference in a heading to an article  shall
                 be taken to include a reference to that article  incomplete
                 or unfinished, provided that, as presented, the  incomplete
                 or unfinished article has the essential  character  of  the
                 complete or finished article.  It shall also  be  taken  to
                 include a reference to that article  complete  or  finished
                 (or falling to be classified as  complete  or  finished  by
                 virtue  of  this  rule),  presented  unassembled  or   dis-
                 assembled."

   It is clear that such  note  will  have  no  application  to  an
           exemption notification which is issued under Section 25  of  the
           Customs Act.  
Therefore, the  fact  that  an  unassembled  plant
           which is incomplete but which has the essential character  of  a
           complete plant is not the test to  be  applied  in  the  present
           case
 it is settled law that
                 "34. The principles as regards construction of an exemption
                 notification  are  no  longer  res  integra;  whereas   the
                 eligibility clause in relation to an exemption notification
                 is given strict meaning wherefor the notification has to be
                 interpreted in terms of  its  language,  once  an  assessee
                 satisfies the  eligibility  clause,  the  exemption  clause
                 therein  may  be  construed   liberally.   An   eligibility
                 criteria,  therefore,  deserves  a   strict   construction,
                 although construction of a condition thereof may be given a
                 liberal meaning."

                 "29. It is now a well-established  principle  of  law  that
                 whereas eligibility criteria  laid  down  in  an  exemption
                 notification are required to be construed strictly, once it
                 is  found  that  the  applicant  satisfies  the  same,  the
                 exemption  notification  should  be  construed   liberally."
 Judged by this test,
it is clear that a hot  mix  plant  of  the
           type mentioned alone is exempt from  payment  of  customs  duty.
         
Obviously, what is meant is that such plant in its entirety must
           be imported albeit in an unassembled form. Judged by this  test,
           it is  clear  that  the  concurrent  findings  of  fact  of  the
           Commissioner and the CESTAT requires  no  interference  by  this
           Court inasmuch as both authorities have  held  that  a  complete
           plant in an unassembled form has  not  in  fact  been  imported.
         
Further, both authorities have relied upon  statements  made  by
           none other than the Vice President of the  Appellant  who  after
           retracting a statement made on 3.1.2002 has  made  a  subsequent
           statement on 21.2.2002 admitting that the  imported  goods  were
           only   components   and   had   not   attained   the   essential
           characteristics of a plant.  The subsequent  statement  has  not
           been  retracted.  
Further,  Shri  P.S.  Banik  an  employee  of
           Marshalls also made a statement that the plant in  its  entirety
           consisted of 11 containerised  sections  of  which  a  few  were
           indigenously produced by Marshalls.
 Shri Bhattacharjee also  an
           employee  of  Marshalls  added  that   what   was   manufactured
           indigenously was essential for the  functioning  of  the  plant.
         
Further, Shri M.V.N. Rao, of the National Highways Authority  of
           India stated that a complete plant had  not  been  imported  and
           that the components of such plant which were  imported  did  not
           have the essential characteristics of a hot mix plant.

   
It is settled law that statements made to  an  Officer  of
           Customs are admissible in evidence  under  Section  108  of  the
           Customs Act, 1962.
In the present case, both the oral evidence  and  the
           documentary evidence ultimately lead  to  the  same  conclusion:
           namely, that what was imported was not a hot mix plant that  was
           complete in itself.

           6.    It may be pointed out that CESTAT has  already  given  the
           appellant  considerable  relief.    The   redemption   fine   of
           Rs.5,00,000/- imposed by the Commissioner was reduced to a  fine
           of Rs.1,00,000/- and a penalty of Rs.1,00,000/- imposed  by  the
           appellant has also been set aside.  In  the  circumstances,  the
           appeal is dismissed with costs of Rs.1,00,000/-.-2015 S.C. MSKLAWREPORTS