ORDER
V. Rajamanickam, Member (T)
1. The appeal is against the order of the Collector (Appeals) in Order No. 2001/86-BCH, dated 24-11-1986, wherein the extension of the Project Import Registration was denied to the appellants.
2. The appellants are stated to be carrying on the industrial activity of heat treatment work, of castings, machine tools and fabricated vessels in their factory. They are registered as a small scale industrial unit with the Directorate of Industries.
3. They were granted an import licence for the import of one complete unit of Mobile Heat Treatment machine. They applied for registration of the contract under the Project Import (Registration of Contract) Regulations, 1965 to avail the benefit of the assessment under Heading 84.66 of the Customs Tariff. The Assistant Collector rejected their application, on the ground that they are dealing with only job work and their activities amount to a specialised support service and not manufacturing activities and hence does not fall within the scope of Industrial Plant as figuring in Tariff Heading 84.66 of the Customs Tariff.
The Collector (Appeals) has upheld the Order of the Assistant Collector, on the ground that the appellants do not employ any process necessary for manufacture, production of a commodity.
4. Shri K. Srinivasan, appearing on behalf of the appellants drew attention to the contract and the licence. The contract was found to be a ‘Proforma Invoice’. All the same Shri Srinivasan said that it contained terms and conditions and the import was for the substantial expansion of their industry. The Ld. Consultant made reference to the Heading 84.66 of the tariff and stated, reference to industrial plant, does not specify an industrial plant producing a product. He referred to various instances where industrial plants which do not produce any commodity are still recognised as industrial plants. Viz. Milk bottling units for bottling milk only and LPG gas bottling units, and several other projects like Port Mechanical Ore Handling Plant, Salaya – Koyali – Oil Pipeline Project where no actual production activity is involved. He referred to the Tribunal decision in 1989 (42) E.L.T. 413 Sujatha International v. Collector of Customs, with reference to the term “Industrial Plant” – para 10, for qualifying for project import. His unit is registered as a factory under the Factories’ Act, and is in possession of a Central Excise Licence. For maintaining that manufacturing activity is involved, he referred to the book “Heat Treater’s guide”, published by American Society of Metals 1982 Edition. He referred to the heat treating operation, to emphasise that the various operations involved transformation and held that this plant was an industrial plant where manufacturing activities of heat treatment is carried out, further in referring to the Indian Boilers Act of 1923, he stated that specifications for the various types of components used in boiler vessels and for raw material, was laid down and in complying with these specifications heat treatment is required thereby process amounting to manufacture is involved. Shri Srinivasan also referred to the Order of the Commissioner of Income-Tax (Appeals) who has dealt with the appellant’s appeal in an income-tax matter, the Commissioner had treated the appellant as being engaged in the process of manufacture or production of article and entitled to investment allowances.
5. The Ld. JDR Shri Durgayya in countering the arguments held that the contention of the Ld. Consultant that the proforma invoice was a contract, stated that it cannot be a contract. He referred to the decision of the Tribunal in 1989 (42) E.L.T. 413 in Sujatha International v. Collector of Customs – para 9, where one of the conditions contemplated in Heading 84.66 is a contract to be in existence. Proforma invoice cannot be taken for a contract. He referred to the Order-in-Original of the Assistant Collector who has observed that the activities undertaken by the appellant was only a job work and cannot be equated to a work on a Project. He referred to Rule 3(3) (b) of the Project Imports (Registration of Contracts) Regulations, 1965 which specifies that the description of the articles to be manufactured, produced mined or explored, shall be indicated in the application. There was no production or manufacture in the case under reference but only heat treatment. The Collector (Appeals) has also referred to this in his Order.
“The main activity undertaken by the appellant is that of heat treatment of other components – fabricated components like pressure vessel, heat exchangers, boilers, machinery components, cast iron castings etc. The said heat treatment process helps to get the required physical, chemical and metallurgical properties like Tensile Strength, Yield Strength, hardness, Ductility, Fatigue strength, Artificial seasoning, Chemical resistance, etc. This would mean that the appellants do not manufacture a new article as per the definition of the Supreme Court in the D.C.M. case i.e. a new and different article does not emerge having a distinct name, character or use, even after treatment given by the appellant retain its name, character even after the process is over.”
Therefore, the Ld. JDR held that there was no manufacture involved.
With reference to the various examples cited as being industrial plants viz. Port Mechanical Ore Handling etc. Shri Durgayya pointed that they were specifically covered by Notification No. 269-Cus., dated 2-8-1976. The appellants’ activity has not been specified as an industrial activity. In the S.S.I, certificate issued by the Directorate of Industries, the activities mentioned are heat treatment work, of castings, machine tools and fabricated vessels. The licence has not been issued for manufacture. He further stated that the appellants’ case is similar to the case of Uma Arts Studio v. Collector of Customs, Cochin in Tribunal decision in Order No. 12/1987-B2 – 1989 (40) E.L.T. 115 (Tri.) wherein the Tribunal has held the letter granted by the Ministry of Industries recommending concessional customs duty would be in furtherance of the recognition of the appellants’ establishment as a Small Scale Industrial Unit, but would not help them in proceedings under the Customs Tariff Act. Therefore, the letter of the Joint Director of Industries to the Jt. Chief Controller of Imports and Exports dated 5-3-1985, which has been produced as an evidence for claiming, that the recommendation, that the licence should be endorsed with project import endorsement, would establish that it was for project import, should not be taken as an evidence that these are project import goods, as the decision whether or not it is a project import lies with the customs authorities.
The reference to the literature on Heat Treatment guide has no relevance and so is the evidence of the Order of the Commissioner of Appeals Income-Tax which has no bearing.
Shri Durgayya, Ld. JDR also cited the Tribunal Decision in 1984 (17) E.L.T. 443 ‘Photovisual, Calcutta v. Collector of Customs, Calcutta’ on the scope of the term ‘Industrial Plant’, para 5 which is very relevant to the appellants’ case, where there is no manufacturing activity.
The next issue raised by the Ld. JDR was whether there is any substantial expansion, as envisaged in Heading 84.66. The Order of the Assistant Collector does not refer that the importation was for substantial expansion, nor has it been agitated at the appellate stage. In view of all these overwhelming conclusions, against the appellants, their case for the benefit of Project Import Concession fails, he said.
6. On an appraisal of the contentions put forth for and against, the basic issue is what constitutes the Project Imports (Registration of Contract) Regulations, 1965? There should be registration of the contract, the importer has to obtain a licence, and the application should specify as required in Rule 3(3), (a)(b)(c)(d) of the Project Import Regulations. The regulations envisage either for initial setting up or for substantial expansion of an existing plant. Sub-rule (b) has to specify the description of the articles to be manufactured, produced, mined or explored. The appellants maintain that their activity is a manufacture while the revenue holds that there is no manufacture with a new product emerging but only a process, or activity of job work. The process of heat treatment will not be a manufacturing activity. The findings of the Collector (Appeals) Supra is in reference. He states that the heat treatment process helps to get the required physical, chemical and metallurgical properties like tensile strength, yield strength, chemical resistance etc., there is no dispute about this process and has also been referred to by the Ld. Consultant from the book on Heat Treatment guide. The dispute is whether this will be sufficient to claim that a manufacture or production is involved. The Collector (Appeals) has cited the Supreme Court’s decision in U.O.I. v. Delhi Cloth & Silk Mills Co. Ltd. wherein it has been observed that manufacture requires a change but every change is not a manufacture and yet a change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinct character and use.
Is the yardstick so specified in the Supreme Court’s decision applicable in respect of the appellants’ case for manufacture? The activity employed is heat treatment, as per certificate of the Directorate of Industries. The manufacturing process as given in the appeal are –
“The main activities undertaken by the appellants is that of heat treatment of several components, fabricated components like pressure vessels, ‘ieat exchangers, boilers, machinery components, cast iron casting, steel casting, stainless steel castings, rolled bars, nuts, bolts forks for lifting trucks and fork lift, axles, shafts, automobile chassis plates, gear box, rope drums for the crane etc. The said heat treatment process helps to get the required physical, chemical and metallurgical properties like Tensile Strength, Yield Strength, Hardness, Ductility, Fatigue strength, Artificial Seasoning, Chemical Resistance, etc.”
The changes effected in respect of each heat treatment has also been given. These activities help in achieving the required specifications in the articles so processed. They do not imply the activities specified in sub-rule 3(b) of Rule 3 of the Project Imports (Regulation of Contract) regulations, viz. articles to be manufactured, produced, mined or explored. Theirs is also not a project entitle to a concession as in the Notification 269-Cus., dated 2-8-1976. This very Scheme of Project Import Concession was introduced in order to have a uniform rate for all items imported for a project under a contract to avoid multiplicity of rates for each article imported and to render the assessment easy, and in this respect the project import regulations require the registration of contract. The Ld. Consultant has maintained that the proforma invoice is the contract, but as pointed by the Ld. JDR, the decision of the Tribunal in Sujatha International v. Collector of Customs in 1989 (42) E.L.T. 413, wherein the requirement of a formal contract has been emphasised and acceptance of letters of credit etc. is not tenable, therefore on the same ratio, a proforma invoice cannot be accepted in the place of a contract and rightly, the contention of the Ld. Consultant of there being a contract has been refuted by the Departments’ Representative, the Ld. JDR.
7. Regarding the issue of the appellant that theirs is an Industrial Plant on the plea that their unit was registered under the Factories Act and possession of a Central Excise licence will render them eligible to be called an Industrial Plant in terms of the Heading 84.66, as relied upon in the case of Sujatha International v. Collector of Customs, is not tenable. The scope of the term Industrial Plant has been analysed threadbare in 1984 (17) E.L.T. 443 (Tribunal) – Photovisual Calcutta v. Collector of Customs, Calcutta, It would be worthwhile to reproduce para 5 as hereunder.
“After careful discussion of the materials placed, we are of the view that the contentions of the appellants cannot be accepted. Tariff Item 84.66 specifically refers to “all items of auxiliary equipment as well as components required for the initial setting up of a unit or the substantial expansion of an existing unit of a specified industrial plant” (the other words are omitted as they are unnecessary). Shri Chandrasekharan stated that the machinery in question has been imported for the purpose of substantial expansion of the appellants’ industry. We have initially to find out whether the appellants’ establishment can be treated as an industry. Only if that basis is established, then the import of the machinery would qualify for assessment under Heading 84.66. The term ‘industrial plant’ has not been defined in the Customs Act or elucidated in the notifications. But ais industry has been defined in Shri T.P. Mukerjee, Law Lexicon Volume I, Page 832 as “any business, trade, undertaking, manufacture or calling employers and includes any calling, service, employment, handicraft of industrial occupation or avocation or work-men”. But this definition refers to the connotation of that term under the Industrial Disputes Act. “Industry” has been defined in Chambers 20th Century Dictionary, page 669, as “any branch of trade or manufacture”. So manufacturing activity is an important indice to determine whether any particular establishment would be an industry. If there is no manufacturing activity or production, then it would not be an industry within the meaning of that term. “Plant” includes collection of machines and appliances grouped together in any workshop, factory or building. Taking these two words together, it is “machinery or plants” begin used in that production. In this background, if we examine the activity carried out by the appellants, it would be clear that they are not carrying on an industry. They have a photographic laboratory and the appliances are required for the purpose of improving their laboratory activity. It is not an industrial plant contemplated under Tariff Item 84.66. That apart, this tariff entry contemplates the expansion of the existing unit which itself must be an industrial plant. But, on a careful analysis, we are of the view that the appellants’ activity cannot be equated to that of an industrial unit. As rightly observed by the lower authority, the appellants’ establishment is not engaged in the manufacture of any standard product. They are not marketing such product either.”
which is squarely on all fours with the present case. Granting they have a Central Excise licence and are registered under the Factories Act, will their activity get covered by the scope of the term industrial plant specified under Heading 84.66? As rightly observed in the abovesaid Tribunal decision, not only the initial setting up should be an industrial plant, but also the one which requires substantial expansion should be an industrial plant. The activity in the Industrial Plant envisages the manufacture and production of goods and not mere heat treatment of articles. The industrial activities envisage approval of projects for the import of items for such project undertaking, the concessional rate of duty is applicable. Therefore in the setup of industrial plants, a major production activity is involved and the appellants’ case will not fit into this scheme of things envisaged in the project import registration and hence the case of the appellant is not acceptable for extending the concession under Heading 84.66.
8. As for the other evidences in support of their claim, viz. the Order of the Commissioner of Income-tax (Appeals) to indicate that theirs was a manufacturing activity and the letter of the Joint Director of Industries to the Joint Chief Controller of Imports and Exports recommending that endorsement of Project Import has been made on the licence, it has to be pointed that the concerned authorities to allow a project import concessions are the Customs Authorities as per the Project Import (Registration of Contract) Regulations, 1965 and references to other agencies not in context will not by itself render the claims for project import acceptable. The citation on Tribunal decisions in Uma Art Studio supra is applicable.
8A. Consequentially, in view of the analysis above made, the appellant have no case and the appeal is therefore dismissed.