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CASE NO.: Appeal (civil)  2532 of 2001

PETITIONER: Commissioner of Customs, Mumbai

RESPONDENT: M/s. Toyo Engineering India Limited

DATE OF JUDGMENT: 31/08/2006

BENCH: ASHOK BHAN & MARKANDEY KATJU

JUDGMENT: J U D G M E N T

BHAN, J.          Revenue has filed this appeal against the final Order No.  1813/2000-B dated 25.10.2000 in Appeal No. C/164/89-B2  passed by the Customs, Excise and Gold (Control) Appellate  Tribunal (for short "the Tribunal") whereby the Tribunal has  set aside the order in original as well as the order passed in  the appeal and held that the machinery and equipment  imported by the assessee-respondent was classifiable under  Heading 98.01 of the First Schedule to the Customs Tariff Act,  1975 (for short "the Tariff Act") and granted the benefit of  Project Import under the Project Import Regulation to the  assessee. Facts:         Assessee-respondent (for short "the respondent")  is  engaged in the setting up of industrial unit such as fertiliser  plant.   M/s. Indian Farmers Fertilisers Cooperative Ltd.  entered into a contract with their parent Company M/s. Toyo  Engineering Corporation, Japan for designing, engineering,  fabricating and commissioning an Ammonia Storage Package  Unit and a Co-generation Plant.  Their Parent Company in  turn entered into an agreement with the respondent to carry  out all the works, services, erection and commissioning of the  project on turn key basis.   The respondent filed an application  on 17.03.1986 with the Contract Registration Cell for grant of  the benefit under the Project Import Scheme read with  Notification No. 72/85-Cus., dated 17.03.1985 in respect of  goods sought to be imported.   Respondent has imported  various special construction equipments, available at their  overseas project at Kuwait, and filed eleven Bills of entry in  March, 1986 for the clearance of goods, which were cleared on  payment of duty under protest.

The Assistant Collector, under Adjudication Order No.  S/5-Misc. 376/86-CC, dated 18.08.1987, rejected the request  of the respondent for registration under the Project Import  Regulation on the ground that the imported goods are the  property of the respondent and even after execution and  completion of the work, these goods would remain the  property of the respondent and the ownership of the imported  goods would not pass on to the Project Authority.  It further  held that as the goods could be used for other work elsewhere  after the completion of the present project, the imported goods  would not qualify for classification under Heading 98.01 of the  Tariff Act.  

Being aggrieved, the respondent filed an appeal before

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the Appellate Authority which was rejected.  It was held that  as per Heading 98.01 of the Tariff Act the items of machinery  or component parts should go into the initial setting up of the  unit and should not merely be used as an aid for the setting  up of the unit or its substantial expansion.  As the respondent  could utilise the machinery elsewhere in the setting up of  other plants, the impugned goods could not be classified  under Heading 98.01 of the Tariff Act.

The respondent being aggrieved filed an appeal before the  Tribunal which has been accepted by the impugned order.   The Tribunal held that the grounds on which both the lower  authorities have denied the facility of project import to the  respondent were not sustainable in law.   After detailed  discussion the Tribunal set aside each of the findings recorded  by the appellate authority and held that the respondent would  be eligible to the benefit asked for.

Heading 98.01 of the Tariff Act reads as under: "98.01 All items of machinery including  prime movers, instruments, apparatus  and appliances, control gear and  transmission equipment, auxiliary  equipment (including those required for  research and development purposes,  testing and quality control), as well as all  components (whether finished or not) or  raw materials for the manufacture of the  aforesaid items and their components,  required for the initial setting up of a  unit, or the substantial expansion of an  existing unit, of a specified: (1) Industrial plant, (2) Irrigation project, (3) Power project, (4) Mining project, (5) Project for the exploration for oil or  other minerals, and (6) Such other projects as the Central  Government may, having regard to the  economic development of the country  notify in the Official Gazette in this  behalf; and spare parts, other raw  materials (including semi-finished  material), or consumable stores not  exceeding 10% of the value of the goods  specified above provided that such spare  parts, raw materials or consumable  stores are essential for the maintenance  of the plant or project mentioned in (1) to  (6) above."

Heading 98.01 covers all the items of machinery  including prime movers, instruments, apparatus and  appliances; control gear and transmission equipment,  auxiliary equipments besides components and raw materials  required for the initial setting up of a unit or the substantial  expansion of an existing unit of specified industrial plant.    The industrial plant would include fertiliser plant as well, as it  is designed to be employed directly in the performance of  processes necessary for manufacture of fertiliser. Since the  fertiliser plant is covered by the industrial plant specified in  Heading 98.01 of the Tariff Act all the "auxiliary equipments"  which are required for the initial setting up of the unit could  be imported under the Project Import Scheme.

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As per Words and Phrases of Excise and Customs by S.B.  Sarkar "auxiliary"  means: "giving additional help; supplemental or  subsidiary; an item not directly a part of  a specific component or system but  required for its functional operation.

According to Black’s Law Dictionary, sixth edition,  ’auxiliary’ means: "Aiding; attendant on."         According to the World Book Dictionary, ’auxiliary’  means:

"a person or thing that helps; aid; syn;  accessory".

Webster’s Encyclopedic Unabridged Dictionary of the  English Language,  (1996 Edn.) "auxiliary" means:

"giving support; serving as an aid;  helpful" It is not disputed that construction equipments imported  by the respondent were used in the initial setting up of the  plant. The Assistant Collector and the appellate authority  denied the facility of the project import as the ownership of the  imported goods would not pass to the project authority and  that the machinery imported could be utilized elsewhere in the  setting up of any other plant.  What is required under heading  98.01 Tariff Act is that the machinery imported should be  required "for the initial setting up of a unit, or the substantial  expansion of an existing unit".  This heading specifically  mentions and includes "auxiliary equipment".   The "auxiliary  equipment" has not been defined under the Tariff Act.  As per  Dictionary meaning, extracted above, it is an equipment which  aids or helps.   Any equipment which aids or helps in the  setting up of an industrial plant would fall and be covered  under heading 98.01 of the Tariff Act.  The mere possibility of  its being used subsequently for other project would not debar  the respondent from availing the facility of project import.   If  the contention of the Revenue is accepted, then resultant  effect as put by the Tribunal would be:   "\005no equipment can be imported for  projects like Konkan Railway Project,  Road Development Projects of the  National Highway Authority of India, etc.  specified under Heading 98.01 of CTA."   

We agree with this observation of the Tribunal.

Counsel appearing for the appellant strenuously  contended that the respondent could not be given the benefit  of the project import  under heading 98.01 of the Tariff Act in  view of the decision of this Court in the Punjab State  Electricity Board Vs. Collector of Customs, Bombay, 1997  (91) ELT 247 (SC).   We do not find any substance in this submission.  In that  case this Court did not consider the vehicles imported to be an  item of auxiliary equipment required for setting up of an initial  unit on the ground that it was used only in shifting of the  transformers which would not constitute an integral part of  the power project.  The vehicles imported were required for  transportation of the transformers from railway yards to the  erection sites and had no relation to power generation or  power project.  After transporting the specified number of

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transformers to the site of sub-station the utility of the  vehicles would be over at the end of such transport and  thereafter the vehicles could certainly be used for other  purposes of the assessee.   That the vehicles,  which are used  in the shifting of the transformers, would not constitute  integral activity of the project.    In the present case goods  imported by the respondent are hydle truck cranes, excavator,  shovel loader, truck, forklift truck, power generators, diesel  welder, welding rectifier, containers tools and tackles  instruments, level Nako with tripod, theodlite nako with  accessories & tripod besides window air conditioners, electric  typewriter and camera with flash (the total cost of last three  items is only Rs.70,000/-, which is negligible).  In fact, it was  not disputed before the Tribunal or before us as well that the  construction equipments imported by the respondent were  used in the initial setting up of the plant.   The goods imported  by the respondent such as hydle truck cranes, excavator,  shovel loader, truck, forklift truck, power generators, diesel  welder, welding rectifier, containers tools and tackles  instruments, level Nako with tripod and  theodlite nako with  accessories & tripod would certainly be auxiliary equipments  which would help in the initial setting up of the industrial  plant. The facility of the project import was denied to the  respondent because the ownership of the imported goods did  not pass to the project authority.  Since it is not disputed that  the construction equipments imported by the respondent were  used in the initial setting up of the plant, then, as per the  provisions of heading 98.01 of the Tariff Act the respondent  could not be denied the benefit of the project import. Before the Tribunal learned departmental representative  appearing for the Revenue had made various other  submissions such as  (1) that absence of a contract specifically  registered for import of construction material; (2) that note (2)  to Chapter 98 according to which Heading 98.01 would apply  to goods which are imported in accordance with the Project  Imports Regulations, 1986; (3) that under Regulation 4 the  assessment under Heading 98.01 shall be available only to  those goods which are imported against one or more specific  contract which have been registered with the appropriate  Customs House.   In the absence of a specific contract being  registered Heading 98.01 would not be applicable to the  impugned goods imported by the respondent;  and (4) that the  benefit of concessional duty under Project Import was not  available if the goods had arrived before the application was  submitted for registration of the goods. All these submissions  were not allowed to be raised by the tribunal as these  submissions had been made for the first time before the  Tribunal.  These submissions had neither been raised before  the adjudicating authority nor the first appellate authority.  It  was held by the Tribunal that the Department could not be  allowed to make out a new case at the appeal stage.   

Learned counsel for the Revenue tried to raise some of  the submissions which were not allowed to be raised by the  Tribunal before us, as well.  We agree with the Tribunal that  the revenue could not be allowed to raise these submissions  for the first time in the second appeal before the Tribunal.   Neither adjudicating authority nor the appellate authority had  denied the facility of the project import to the respondent on  any of these grounds.  These grounds did not find mention in  the show cause notice as well.  The Department cannot be  travel beyond the show cause notice.  Even in the grounds of  appeals these points have not been taken. For the reasons stated above, we do not find any merit in  this appeal.  We agree with the findings recorded by the

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Tribunal.  Accordingly, the appeal is dismissed, leaving the  parties to bear their own costs.