ORDER
Archana Wadhwa, Member (J)
1. As a common issue is involved in all the three appeals, the same are being disposed of by a common order. All the appellants imported Motor Grader MG 330 and sought benefit of exemption from payment of Customs duty in terms of the Notification No. 11/97-Cus dated 01/03/97, as amended by Notification No. 73/97-Cus dated 03/10/99 and Notification No. 01/98 dated 21/01/98 and the successor Notifications No. 23/98-Cus dated 02/06/98 and No. 20/99-Cus dated 28/02/99. Relevant entries in all the above Notifications are identical, which granted exemption to several items of machinery utilized for road construction. The appellants claimed the benefit of items covered by the entries in the Notifications “Surface Dressing Equipment (Self Propelled) (Chips Spreader)”.
2. Vide impugned order, the Commissioner has denied the benefit of Notification to Motor Grader MG 330 on the finding that the same cannot be said to be covered by the entry inasmuch as the same is not used for Surface Dressing of the road or as a Chips Spreader. Accordingly, demand stands confirmed against the appellants and the goods confiscated with an option to the appellants to redeem the same on payment of redemption fine, along with imposition of personal penalties. The said order is impugned before us.
3. We have heard Shri T. Vishwanathan, Ld. Advocate appearing for the appellants and Shri R.B. Pardeshi, Ld. DR appearing for the revenue.
4. As per facts on record, the appellants were awarded the contract for construction of National Highway in India by the National Highway Division, Ahmedabad. They imported one “Mitsubishi Motor Grader MG 330 (Surface Dressing Equipment)” and filed Bill of Entry by claiming the exemption in terms of the above Notification. The Bill of Entry was assessed provisionally except in the case of M/s.Ircon International Ltd., who entered into a bond with the revenue. As a result of subsequent investigations conducted, statements of various persons were recorded and it was found that Motor Grader in question, are not “Self Propelled Chips Spreader” and hence cannot be treated as Surface Dressing Equipment and the benefit of Notification cannot be extended to them.
5. The Commissioner in his impugned order has placed reliance on the statements of Shri Monish Das Gupta, DGM, of M/s.McNally Bharat Eng. Co. Ltd., who had sold the goods on High Sea Sale basis to the appellants. Shri Das Gupta, in his statement, deposed that the said item was never marketed by them as Self Propelled Chips Spreader and the same can never be deployed to do the work of chips spreading involved in surface dressing as described in Clause 508 of the Ministry of Surface Transport (MOST) Specifications. He also clarified that the said parties were informed that the earlier clearance of the identical items were made on payment of duty and the appellants would be seeking the exemption at their own risk. Shri Das Gupta also clarified that the catalogue of the Motor Grader does not describe the same to be the Self Propelled Chips Spreader. The job of the said Motor Grader was basically to maintain the road profile at sub base and not at the final stage of dressing of the surface.
6. Statements of Shri Baldeo Raj Salwan, GM, National Highways Authority of India, Gurgaon was recorded. Detailing the process of construction of road, Shri Salwan clarified that there are different stages involved in the construction of a new road. Firstly, cleaning and grubbing of the earth is undertaken with the help of Dozer and Excavator. Then sub grade is laid of 50 mm thick consisting of earth with the help of Motor Grader and Compactor. Grader is used to bring proper surface of grading. Thirdly, GSB comprising of stone aggregates with stone dust and fines are spread with the help of paver and then compacted. Fourthly, the WMM is laid in which stone aggregates with fines mixed with water is spread with the help of paver and then compacted. Fifthly, DBM in two layers are laid. DBM comprises of stone grit, stone dust and bitumen and it is spread with the help of sensor paver to bring profile/surface in proper shape and then compacted with Vibratory Roller and lastly, the bituminous concrete by way of wearing coarse is laid of 40 mm thickness BC consisting of bitumen aggregates, stone dust and fines. It is laid with the help of sensor paver and compacted with vibratory roller and make the surface proper profile and shape. He further stated that surface dressing is defined as bituminous surface dressing and Clause 508 of MOST specification, 3rd edition, 1995 referred to it. In this bitumen is first spread with the help of a sprayer and then stone chipping are spread uniformly over it with the help of self propelled or towed mechanical grid spreader and compacted with roller. Thereafter, a seal coat is applied over it which consists of coarse sand and bitumen to give smooth surface. He further clarified that motor grader is not used in bituminous surface dressing and that this item is not used in the construction of Highways. It is mostly used in the construction of minor village roads or maintaining the minor roads. He stated that motor grader and self propelled chips spreader are different and district equipment/machines. He further stated that the earlier clarification dated 15/06/99 issued by him to M/s.BSC RBM J.V., Hyderbad was not for the purpose of subject exemption benefit.
7. The revenue also relied upon the Ministry of Surface & Transports specifications in the Hand Book on Road Construction Machinery and the letter No. RW-14013/8/99-RMP dated 28/09/99 from the MOST New Delhi. In this letter the Ministry of Surface Transport had clarified that motor graders and chip spreaders are not the same, that the motor grader cannot do the work of chip spreader and that basically the chip spreader is used mainly for surface processing (wearing course of the road surface) where a uniform layer of bitumen is laid with the help of bitumen distributor and chip spreader and then the uniform size of aggregate embedded in the bituminous layer is spread over coated bitumen layer and then gives a uniform surface for spreading
8. On the other hand, the appellants contended that the words “Surface Dressing” appearing in the Notification should not be given a restricted meaning. The same not only refers to preparation and dressing of the top most layer but also covers the preparation of all the layers of a road. They also draw the attention of the adjudicating authority to the fact that the Notification separately covers “pavers” which are used for dressing final layer of the road and if the surface dressing equipment has to be given a narrow construction, as proposed by the revenue, then there was no need to separately include the paver in the Notification. They also relied upon the general principle of construction keeping in view the objects and purpose of the Notification, which was to exempt the goods required for construction of National Highways.
9. During the course of adjudication, the appellants also cross examined the deponents statement and re-iterated their earlier stands that Motor Grader should be held to be Surface Dressing Equipment. It was contended that the expression “Chips Spreader” appearing in the Notification is only by way of illustration and is not exhaustive. Inasmuch as the Motor Grader has a blade, which performance a function of spreading a mixture of sand, granules, etc. the same should be treated as Chips Spreader. Demand in the case of M/s.Ircon International Ltd. was also challenged on the point of limitation on the ground that the department had earlier cleared identical machines by extending the benefit of exemption notification.
10. The above contentions were not accepted by the Commissioner, who confirmed the demands, confiscated the goods and imposed penalties. Hence the present appeals.
11. After hearing both sides, we find that the dispute in the present appeal relates to determination of the question as to whether Motor Grader could be treated as Surface Dressing Equipment (Self Propelled) (Chips Spreader). It is seen that the Notification specifically lists the above machine as entitled to exemption and it is not that all the equipment or machinery required for the construction of the road had been extended the exemption. The said Notification also covers various other items used for construction of the road. As such, it has to be held that only if Motor Grader can be considered as Surface Dressing Equipment, Chips Spreader, the same would be covered by the exemption Notification. The appellant’s contention that legislative intend should be kept in mind, while interpreting the Notification cannot be accepted inasmuch as there is no ambiguity in the language of the Notification, which is clear and, as such, there is no need to go to legislative intent or invoke the principles of contemporaneous expositio. It is the appellant, who is claiming the benefit of Notification and it is for them to establish that the machine imported by them is nothing but Surface Dressing Equipment (Chips Spreader).
12. From the detailed method of construction of roads, it is undisputed that first cleaning and grubbing of earth is undertaken with the help of dozer and Excavator. Then sub grade is laid with a thick layer consisting of earth with the help of Motor Grader and Compactor. Grader is used to bring proper surface of grading. Then an aggregate of stone dust and fines is spread with the help of paver and then compacted. Thereafter, W.MM is laid in which stone aggregates with fines mixed with water is spread and again compacted. Thereafter. D.B.M comprising of stone grit, stone dust and bitumen is spread and then compacted. Motor Grader is basically used to maintain the road profile at sub-base, base and WMM. As such, it becomes clear from the above that Motor Grader is, at no stage of road construction, is used as Surface Dressing Equipment. The above fact is also not disputed by the appellants, but they contend that Surface Dressing Equipment would take into its ambit that equipment also, which is used for Dressing and preparing the lower layers of the road, which may not be the surface layer. We do not find favour with the above arguments with the appellants, inasmuch as the expression Surface Dressing Equipment, being un-ambiguous, has to necessarily refer to the equipment used for Surface Dressing and not for the inner layer of the road.
13. The Commissioner in his impugned order has referred to the Hand Book of Road Construction Machinery, published by Indian Road Congress on behalf of the Govt. of India, Ministry of Shipping & Transport, the functions of Motor grader are described as under:
The motor grader is a four or six wheeled self propelled earth moving machine, primarily designed for the work of leveling, grading, shaping and finishing of earth work, berms, side-slopes, and for ditch making operations. It has a long wheel base, which will allow it to travel over uneven ground and to level it to an even grade. It is also provided with scrarifier teeth for loosening the earth, before the blade is used for grading power controls enable to raise or lower the ends of the blade and to turn the blade horizontally or vertically.
The Commissioner, by referring to the above publication has thus concluded that it is clear that a motor grader is basically an earth moving machine performing the functions of leveling, grading, etc. and finishing of earth work. In the same book, Chapter 3 details the guidelines for the selection of equipment for each stage of operation in road building. It also outlines the various types of equipments used in road building. Table 3.2 is titled Selection of plant for earth moving operations. This table refers to various individual operations listed in Sl.No. 1 to 11 and in almost all these operations one of the equipments mentioned in a motor grader. Table 3.3 is titled selection of plant for compaction. This refers to five different types of operations for each of which the equipments are specified. Table 3.4 refers to Selection of plant for bituminous pavement. This table has five serial numbers covering different operations. Sl.No. 1 refers to surface dressing and among the equipments mentioned for this operation is a Chip Spreader. From the above, it may be seen that the equipments have been mentioned sequentially with the different stages involved in building a road. It starts with earth moving operations and ends with bituminous surface. The operation of surface dressing in which chip spreader is used finds mention in the last stage relating to bituminous pavement.
Again, in the specifications for roads and bridges published by Indian Road Congress on behalf of the Govt. of India, Ministry of Shipping & Transport, we find the following Sections:
a) Section 300 relates to Earth work, erosion control and drainage
b) Section 400 relates to sub bases, bases (non-bituminous) and shoulders.
c) Section 500 relates to Base and surface courses (Bituminous)
It is in Section 500 that reference is made to surface dressing. Para 510 of Section 500 (Fourth Revision, August – 2001) is titled “Surface Dressing”. Para 510.1 states that “This work shall consist of the application of one coat or two coats of surface dressing, each coal consisting of a layer of bituminous binder sprayed on a previous prepared base, followed by a cover of surface chips rolled in to form a wearing course to the requirement of these specifications”. It may thus be seen that it is only under Section 500 relating to the last stage of road making that there is a reference to “Surface Dressing” and it is mentioned clearly that the term “Surface Dressing” implies application of a layer of bituminous binder sprayed on a previously prepared base followed by a cover of store chips.
From the relevant provisions in the two publications as detailed above, it is clear that the term “Surface Dressing” is understood in technical parlance as the dressing of the final surface of a road and this dressing consists of the application of one or two coats of a layer of bituminous binder sprayed on a previously prepared base, followed by a cover of stone chips. It is also clear that a chips spreader is used for this operation. On the other hand, a motor grader is used in the earlier stages of construction of a road and is primarily designed for the work of leveling, grading, shaping and finishing of earth work. This conclusion also flows from a reading of the statements of Shri Monish Das Gupta and Shri Baldeo Raj Salwan as well as from the letter dated 28/09/99 from the Ministry of Surface Transport, New Delhi.
We do not find any fault in the above reasoning of the adjudicating authority. When the Motor Grader has admittedly not been used for Surface Dressing of the road, the same cannot be extended the benefit of exemption.
14. What exactly is “Surface Dressing” from the various technical books produced before us, it emerges that basically surface dressing involves spraying bitumen on a clean, dry road surface, over which stone chippings are spread and surface is then rolled to “embed” the aggregate and final swept to remove any loose stone before traffic is allowed to move on the new surface. Motor Grader is admittedly used for spreading of road materials for the inner layers of the road and not for the surface layer. When the notification specifically uses the unambiguous expression “surface dressing equipment”, we fail to appreciate that the benefit should be extended to the equipment used for making and dressing the inner layers.
15. Similarly, the appellant’s contention is that the expression Chips Spreader appearing in the relevant entry of the Notification is only by way of illustration example and cannot be held to be exhaustive is not impressive. The Notification clearly uses the expression Surface Dressing Equipment “Self Propelled Chips Spreader”. As such, the Chips Spreader is not by way of an example appearing in the said entry but the entry itself refers to Chips Spreader. As such, we held that the entry relates to the Surface Dressing Equipment, Chips Spreader. Inasmuch as the imported equipments in the appellants case is neither used for Surface Dressing nor is a Chips Spreader, the entry cannot be stretched so as to assign the extended meaning to the exempted item. We accordingly held that the benefit of Notification is not available to the appellants.
16. In the case of M/s.Iron International Ltd., we find that the demand has also been assailed on the point of limitation having been raised after the normal period of limitation. The appellants contend that the revenue itself was of the view that the benefit of the Notification is available to the Motor Grader. In this regard our attention has been drawn to the noting of the Commissioner in the file of Customs House, wherein, after considering all the facts and the catalogue of Motor Grader, the Commissioner came to a view that the benefit of the Notification is available. The revenue while assessing the Bill of Entries relating to the said appellants observed that the benefit of Notification for this item is extended as per the Commissioner’s order in file No. S/26-319/98 10A JCH. As such, it is clear that the revenue itself was entertaining a view that the item in question is covered by the notification. Demand raised subsequently, after the normal period of limitation, on change of view, is hit by the bar of limitation. The revenue’s contention that the said appellants had given an undertaking in the shape of a bond at the time of clearance of the goods and, hence, limitation will not apply, does not appeal to us. We have seen the undertaking given by the appellants in terms of the provisions of Notification. The said undertaking is to the effect that the goods imported for construction of highways shall be exclusively used for the purpose specified and shall not be sold, transferred or otherwise disposed for a period of five years from the date of importation. It further states that in the event of failure to use the goods for such purpose, the appellants shall pay the amount equal to the difference between the duty leviable on the said imported goods but for the exemption and that already paid at the time of importation. As such, it is seen that the said undertaking is in the nature of an end use condition, being to the effect that the goods would be used for the purpose for which they were imported. There is no allegations that the goods have not been used for construction of highways or have been transferred, sold or disposed of in contravention of the Notification. The demand of duty has to be raised in terms of the provisions of Section 28 of the Customs Act, within the normal period of limitation and in the absence of any suppression, mis-statement, etc, longer period cannot be invoked. The entire facts were placed by the said appellants before the Customs authorities and it is only thereafter the benefit of notification was extended to the appellants. In fact in another file of importer of identical goods, the Commissioner has taken the same view. As such, it cannot be said that the appellant’s claim of exemption was on account of any malafide intentions. Show cause notice issued after a lapse of period of three years from the date of importation is barred by limitation, in the absence of any provisional assessments. As such, we set aside the demand of duty in the case of M/s.Iron International as bar by limitation.
17. Inasmuch as the demands in the other two appeals has been admittedly raised within the limitation period and in view of our findings above as regards merits of the case, demands against the said two appellants are confirmed.
18. Similarly, as regards confiscation of the goods and imposition of penalty, we find that the issue involved is as regards the bonafide dispute of interpretation of Notification. When the Commissioner himself has taken a view earlier that the benefit of Notification would be available to the Motor Grader, the appellants cannot be held guilty of entertaining the same bonafide belief of availability of Notification. As such, in our views, confiscation of the goods with an option to the appellants to redeem the same or imposition of personal penalty upon them is neither justified nor warranted. The same are accordingly set aside in all the appeals.
19. The appeals are disposed of in above terms.
(Pronounced in Court on 12/9/06)