ORDER
K.C. Mamgain, Member (T)
1. This is an appeal filed by Revenue against the Order-in-Original No 23/98 dated 13.11.98, passed by the Commissioner of Customs & Central Excise (Appeals), Hydrabad.
2. M/s. Sewa Paper Mills Ltd., Gaganpur, Jeypore, Orissa have entered into a contract with M/s. Gen Maskiner, AB, Sweden for supply of one complete deinking plant with pump drying and handling equipment valued at UST 13,74,000/- On an application made by them, the said project contract was registered with Customs House, Visakhapatnam under Project Import Regulations 1986, for setting up of paper plant of Jeypore, Orissa. The parts of such plant which were imported and cleared under the Bills of Entry were taken and installed in the premises of M/s. Sewa Paper Mills Ltd. Subsequently, M/s. Sewa Paper Mills obtained clearance of second hand deinking plant against Bills of Entry Nos. 213 dated 23.10.86 and 046 dated 10.11.86 through Visakhapatnam Customs House. The goods were assessed provisionally under concessional rate of duty. Subsequently M/s. Sewa Paper Mills became sick and was taken over by M/s. Ballarpur Industries Ltd. On reference made by the Department calling for necessary documents for finalisation of project contract, it was informed by M/s. Ballapur Industries Ltd that the machinery imported was never brought to the unit at Jeypore, Orissa. Accordingly a show cause notice was issued to M/s. Sewa Paper Mills Ltd. to pay normal rate of duty since they were not eligible for concessional rate of duty under Project Import Regulation as the goods were transferred to M/s. Sunshine Pulp & Paper Pvt Ltd. In their reply to show cause notice, the importers informed that the goods were transferred to Sunshine Paper & Pulp Ltd. A personal hearing was granted on 18.9.95 by the Assistant Commissioner of Customs and plant site verification was conducted by Shri R.V. Balaram, Appraiser in the present of Shri A.N. Ganga Raju, Consultant and Shri yetender Mohan both of M/s. Sewa Paper Mills Ltd. which confirmed that the goods were installed at the premises of M/s. Sunshine Pulp & Paper Pvt. Ltd., Dist Ghaziabad (U.P.) In view of the new fact, a fresh show cause notice was issued demanding normal rate of duty. There case was adjudicated by the Assistant Commissioner of Customs holding that the goods are liable for payment of duty as per normal rate without duty exemption. being aggrieved with the order passed by the Assistant Commissioner, the importers filed appeal before the Commissioner (Appeals) who as per the impugned order set aside the order of the Assistant Commissioner.
3. Smt. Radha Arun, learned SDR appeared for the Revenue.None appeared for the Respondents. The learned SDR stated that the notice for hearing of the appeal was served on the Respondent. Nobody appeared on behalf of them nor any cross objection has been filed. Therefore, the matter is disposed off on merits based on the evidence on the records.
4. The learned SDR pleaded that as part of the project, M/s. Sewa Paper Mills Ltd., Jeypore, Orissa, imported second hand deinking machinery through Visakhapatnam Customs House vide Warehousing Bills of Entry No 0213 dated 23.10.86 and 0046 dated 10.11.86 and the goods were assessed to concessional rate of duty under Project Import Regulations. instead of installing the deinking machinery in the unit of M/s. Sewa Paper Mills at Jeypore, Orissa, they were used in a new unit named M/s. Sunshine Paper Mills at Ghaziabad (U.P.) Hence, M/s. Sewa Paper Mills are not eligible to concessional rate of duty under Project Import Regulations and they were liable to pay normal rate of duty as per the Customs Tariff. In similar circumstances, in the case of jackson Thavera Vs. Collector of Customs & Central Excise reported in 1992 (61) ELT 343 (SC), the Hon’ble Supreme Court held that since the appellant did not install the machinery for the purpose it was imported, but transferred it to another company after it had been cleared from Customs the appellant were not entitled to the benefit of the concessional rate of duty under Project Import Regulations. In the light of this judgment, M/s. Sewa Paper Mills were also not eligible for concessional rate of duty. The Commissioner (Appeals) has erred in considering the submission of the party that as per the Ministry’s instructions contained in F. No. 521 92 90-Cus (TU) what is important is that the goods imported have been put to use for which purpose the same were imported. A plain reading of the Ministry’s instructions make it clear that the benefit of the project imports are available to the goods imported irrespective of the fact whether such goods are meant to be used by actual owner of the project or contractor or sub-contractor, if such imports are made for the purpose of setting up of a particular project. In the instant case, the simple reason as to why the department denied the benefit of project import is that part of the machinery was diverted for utilisation in some other unit through meant for production of same goods. As per the definition under Project Import Regulations 1986, “an industrial plant is an industrial system designed to be employed directly in the performance of any process or series of processes necessary for manufacture, Production or extraction of a commodity.” In the context of this definition, it is apparent that what was diverted is not an industrial plant but only on individual machinery which cannot be considered an industrial plant. Therefore, the submissions of the party that the imported goods have been diverted for the manufacture of the same end goods does not hold good. As per the Heading 9801, under which the project imports are classified, the concession is extended for initial setting upto of a unit or the substantial expansion of an existing unit. In the instant case, the project imports for setting up of a paper plant was registered with the Customs House and some machinery cleared and installed in the premises of M/s. Sewa Paper Mills. The machinery in dispute i.e. deinking machinery which is part of the project, after clearance was taken and installed in some other paper mills. The fact of diversion came to the department’s knowledge only when enquires were made regarding the utilisation of the imported machinery. The diversion of the deinking machinery was neither for the initial setting up nor for substantial expansion of an existing plant. The Commissioner (Appeals) has observed that there was no diversion of goods within the meaning of section 111(o) of Customs Act, 1962 for the reason that the appellant informed Customs authority more than once that the goods imported for a particular paper mills were used in another plant for the reason that the reason that the first one went sick and the successor firm did not was not the subject goods. This observation of the Commissioner (Appeals) is incorrect. The goods diverted was not an entire plant but only machinery (Referred to as part of paper making plant). As a consequence of such diversion, the conditions of provisions of Project Import regulations and also the purpose for which such concession is extended in terms of Heading 98.01 of Customs Tariff stand violated. The mere fact that Shri Avtar Verma is the promoter of both M/s. Sewa Paper Mills and M/s. Sunshine Pulp & Papers Ltd does not make goods imported by him to be eligible for concessional rate of duty. The goods were eligible for concessional rate of duty as long as they are installed at M/s. Sewa Paper Mills, Jeypore, Orissa. Therefore the order the commissioner (Appeals) may be set aside.
5. From the records, we find that M/s. Sewa Paper Mills, Jaypore, Orissa registered a Project Contract at Visakhapatnam Customs under Project Import Regulations for setting up of paper plant at Jeypore, Orissa. As part of the Project, they imported some machinery and installed in their premises. They also imported second hand deinking machinery through Visakhapatnam Customs House vide Bills of Entry 231 dated 23.10.86 and 046 dated 10.11.86 and these goods were assessed to concessional rate of duty under Project Import Regulations. Instead of installing the deinking machinery, unlike the other machinery in M/s. Sewa Paper Mills, Jeypore, Orissa, they used this deinking machinery in M/s. sunshine Pulp & Paper Mills (P) Ltd., Ghaziabad. The case is squarely covered by decision of the Supreme Court in the case of Jacsons Thavera Vs. Collector of Customs & Central Excise reported in 1992 (61) ELT 343 (SC) wherein it was held that “since the appellant did not install the machinery for the purpose it was imported, but transferred it to another company after it has been cleared from Customs, the appellant were not entitled to the benefit of the concessional rate of duty.” In the present case, part of plant was imported and cleared under Bills of Entry and installed in the premises of erstwhile M/s. Sewa Paper Mills. Subsequently, M/s.Sewa Paper Mills obtained clearance of second hand deinking plant against Bills of Entry Nos 213 dated 23.10.86 and 046 dated 10.11.86 through Visakahapatnam Customs House and these goods were deverted to M/s. Sunshine Pulp & Paper Mills Ltd., Ghaziabad which is another company. Though the promoter of both the companies is same, the Sewa Paper Mills plant was taken over by M/s. Ballarpur Industries Ltd. which is a different company and M/s. Sunshine Pulp & Paper Mills (P) Ltd. is a different company. The goods which were imported by M/s. Sewa Paper Mills were not utilised by them but they diverted these goods to another company. Therefore concessional rate of duty under Project Import Regulations, 1986 is not applicable. The Board’s Instructions relied upon by the Commissioner (Appeals) clarify that the Project Contract Scheme has been formed to simplifying the procedure of the assessment. The main criteria is that the goods should be meant for use in a particular project. In the present case, these goods were imported for a particular project for using them in the premises of M/s. Sewa Paper Mills. Since these were diverted to another mills, it was not eligible for the concessional rate of duty as was held by the adjudicating authority. The Commissioner (Appeals) has gone on the ground that Shri Avtar Verma is the promotor of both the paper mills in question and the appellants have informed the Customs authority that goods imported for a particular mills were used in another paper mills for the reason that the first one became sick and the successor firm did not want the subject goods, therefore they are eligible for concessional rate of duty. We find that for the Project Import, even if the promotor is one, the diversion of goods to another unit is not permitted. Therefore the Commissioner (Appeals) was not correct in holding that the concessional rate of duty is applicable. The goods were not used in the project for which there were imported. Therefore concessional rate of duty under project Import Regulations is not applicable. Following the decision of the Supreme Court in the case of Jacsons Thavera (supra),we set aside the order of the Commissioner (Appeals) and allow the appeal filed by the Revenue.
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