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PETITIONER: MODI RUBBER LIMITED

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT:       26/08/1997

BENCH: SUHAS C. SEN, K.T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:                 THE 26TH DAY OF AUGUST, 1997 Present:               Hon’ble 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                       J U D G M E N T      The following Judgment of the Court was delivered:                       J U D G M E N T SEN, J.      Mode 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.      On  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

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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 allowed.      The 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:      "MACHINERIES     AND     APPARATUS;      ELECTRICAL 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:      Provided 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"      53.   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

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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 machine.      On 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".      After 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.      Having 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. for  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.      In 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.      Having 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.