ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against from Order-in-Original No. 32/2004 Cus. Adjn. (Commr.) dated 14.9.2004 passed by the Commissioner of Customs, Bangalore.
2. The appellants imported machineries/equipment in terms of Notifications No. 20/99 Cus. dated 28.2.21999; No. 16/2000-Cus. dated 1.3.2000; No. 17/2001-Cus. dated 1.3.2001; and No. 21/2002 dated 1.3.2002 availing the benefit of concessional rate of duty on the ground that they are required for textile industry/for use in textile industry. Out of the machines imported, few of them were sold to hospitals/dry cleaners. Consequently, Revenue proceeded against the appellants that those machineries would not be entitled for the benefit of the Notifications, because they had not been actually used in the textile industry. In the impugned order, the Commissioner demanded differential duty of Rs. 15,57,235/- under Section 28 of the Customs Act, 1962. Further, he has imposed a penalty of Rs. 1,00,000/- on the appellant company under Section 112(a) of the Customs Act, 1962. The appellants strongly challenge the impugned order.
3. Shri B.V. Kumar, learned Advocate appeared for the appellants and Shri K. Sambi Reddy, learned JDR appeared for the Revenue.
4. The learned advocate urged the following points.
(i) The Show Cause Notice is barred by limitation, as the demand for duty has been made in April 2004 in respect of the imports made during the period from April 1999 to February 2003. There is no evidence for suppression of facts or any mis-declarations. The description of the impugned goods and their classifications has been correctly mentioned in the relevant bills of entry and other documents. There is no allegation that the impugned machines do not figure in List 10, List 17, List 18 and List 30 of the relevant Notifications. Moreover, the appellants addressed letters dated 15.3.2003 and 20.6.2003 to the Commissioner with regard to claiming for the benefit under the Notification. They were also under the bonafide belief and continue to hold such belief that the said Notifications do not impose any condition of actual use or proof of actual use by textile industry. The following case laws are relied on.
(a) CCE, Surat v. Surat Textile Mills Ltd. .
(b) Northern Plastics Ltd. v. CC .
(c) CC, New Delhi v. Maruti Udyog Ltd. and Vice Versa 2002 (48) RLT 84 (T).
(d) Pushpam Pharmaceuticals Company v. CCE, Bombay .
(e) Tamil Nadu Housing Board v. CCE, Madras .
(f) Hindustan Steel Industries v. CCE, Chandigarh . [The above decision has been affirmed by the Hon’ble Apex Court and is reported in 2004 (163) ELT A44].
(ii) The learned advocate took us through the relevant Notifications and emphasized that the machinery or equipment specified in the relevant List appended to the Notification are exempted, when required for textile industry. In the first three Notifications, the phrase used is “required for textile industry”. In the last Notification, the phrase used is “for use in the textile industry”. It is the appellant’s contention that so long as the imported goods conforms to the description in the Notification the benefit should be given. In other words, the machines should be capable of being used in textile industry and there is no requirement that they should be actually used in textile industry.
(iii) A careful reading of the Notification makes it clear that no end use condition has been stipulated.
(iv) The words required for textile industry/ for use in the textile industry which appear in the Notifications should not be taken in a narrow sense to mean actual use in the textile industry only. The Commissioner has given a narrow interpretation to these Notifications by observing that if the intention of the legislature were to grant benefit without any condition, the Notification would have stated so. The observation of the Commissioner is misplaced, as while interpreting a Notification word and intendments not present in the Notification cannot be imported into it.
(v) The word “textile industry” is of wide import and its meaning cannot be restricted only for the manufacture of yarn or fabrics. The Chapter Headings under Chapter 84 cover a wide range of machinery, right from the stage of extruding, drawing, texturing or cutting man-made fabrics, till they are finished and are stitched into ready-made garments. The ready-made garments are ready to be exported are sold in the domestic market only after washing, dry cleaning and pressing. For administrative convenience, many large textiles units often engage the service of job workers to undertake some incidental work like stain removing, dry cleaning, washing, calendaring, and pressing. Hence, it is not correct to observe that only large textile units are eligible for the benefit of the said Notifications, when the activities of such job workers, using the impugned machines also relate to activities of textiles units.
(vi) A perusal of letters/delivery challans/bills collected from various customers reveals that the impugned goods are being used for doing job work for garment manufacturers-Exporters. In such cases, it cannot be said that the said goods are not being used for required for textile industry.
(vii) In the catena of decisions, the Apex Court as well as the Tribunal have held that the words Required for or Intended for use, does not imply that goods should be actually used. They should be capable of being used. Further, a Notification should not be read in a narrow manner so as to defeat the object of a Notification. They have relied on the following case laws.
Sl. No.
Citation
Gist of the Decision
1.
Asean Trading Agency v. CC –
(Tri.)
CC,
Chennai v. Q-max Test Equipment Pvt. Ltd.
Himson
Textile Engg. Indus. Ltd. v. CC (AIR), Mum
Clough
Engineering Ltd. v. CC 2006 (198) ELT 457 (T)
The words “Required for” would also
include materials, which are not directly used in the manufacture of
resultant product, but should be capable of being used.
Whether
the Appellant is the actual user or not is irrelevant
2.
State of Haryana v. Dalmia Dadri Cement Ltd., –
A.K.
Exporters v. CC, Chennai
Sha
Harak Chand Dharmaji v. CC, Madras .
The expression “for use” must mean
“Intended for use” and does not imply “goods actually
used” or “goods used”.
3
CCE, Ahmedabad v. Maize Products .
Camphor
and Allied Products Ltd. v. CCE, Allahabad
End Use Certificate is not required to be furnished
in the absence of any such requirement built into the Notification.
4
K.R. Steel Union Ltd., v. CC, Kandla
CCE v.
Himalayan Co-op Milk Product Union Ltd.
Oblum
Electrical Industries Pvt. Ltd. v. CC, Bombay
A Notification should not be read in a narrow
manner so as to defeat the object of a Notification.
5
Goenka Woollen Mills Ltd. v. CCE 2001 (135)
ELT 873 (T)
CCE,
Mum v. A. Shankar Rao 2002 (149) ELT 387 (T)
Penalty cannot be imposed when there is a
bonafide dispute about the interpretation of an exemption Notification.
CBEC Circular No. 1/2005 – Cus. dated 11.1.2005
Notification No. 21/2002-Cus. dated 1.3.2002 for
use in “Textile Industry”.
The
Tariff conference of Chief Commissioner of Customs held at Calcutta on
22.1.04/23.1.04 decided that the Notification allows the import of general
purpose machinery also as listed in List 30 so long as they are capable of
use in Textile industry and eligible for exemption under Sl. No. 250 of
Notification No. 21/2002-Cus.
(viii) In view of the above submissions, the Tribunal may allow the appeal.
5. While reiterating the impugned order, the learned JDR relied on the Apex Court decision in the case of Collector of Customs, Bombay v. Handicraft Exports , wherein the court while interpreting the words “used in leather industry”, in the context of Notification No. 29/79 Cus. dated 10.2.1979 held that the importer will have to prove that the goods were not only capable of being utilized as embellishment for shoes but also that they were imported for that purpose.
6. We have gone through the records of the case carefully. The relevant Notifications contain a table appended to them covering the description of the goods, which are exempted along with Chapter or Heading or Sub Heading. Further, the rates of duty are also indicated. The last column of the table contains the condition number, which should be fulfilled while obtaining the benefit of the Notification. The conditions are given in the Annexure to the Notification. What we want to emphasize is that if certain conditions are to be fulfilled in respect of the imported goods, those conditions are serially listed in the Annexure and the serial number (Sl. No.) of the condition is given in the table in the last column against the relevant entry. In the present case, let us take Notification No. 21/2002-Cus. Dated 1.3.2002. The relevant entry is found in Sl. No. 250 of the table annexed to the Notification. We are extracting the entries in Sl. No. 250.
Sl. No.
Chapter or Heading or Sub-Heading
Description of goods
Standard rate
Additional duty rate
Condition No.
250
84 or any other Chapter
The following goods for use in the textile
industry, namely:
(1) Machinery or equipment specified in List 30:
(2) Parts, for manufacture of the goods at (1)
above:
5%
5%
–
–
–
5
6.1 A careful reading of the above entry shows that certain goods for use in textile industries are entitled for concessional rate of duty. What are these goods? These goods are mentioned in List 30. What are the conditions to be fulfilled? In the sixth column relating to Condition, nothing is specified. That means the machinery or equipment specified in List 30 are entitled for concessional rate of duty unconditionally. A perusal of List 30 reveals that it contains descriptions of all machineries relating to textile industry. In other words, the machineries, which are used in textile industry, are listed in List 30 and all those listed machineries are entitled for the benefit of concessional rate of duty, when they are imported. There is no condition that they should be actually used in the textile industry. No doubt, no one will import textile machinery for some other purpose. That goes without saying. There may be some rare cases where a machinery or equipment may be capable of use in some other industry other than textile industry. Even in that case, the exemption benefit cannot be denied for the reason that in the column relating to condition, nothing has been specified. Where any condition is to be fulfilled, the Sl. No. of the condition is invariably mentioned in Column 6. With regard to parts for manufacture of the goods at 1 above, it is seen that in Column No. 6, there is a mention of 5. That means if the parts are imported, a condition has to be fulfilled. In the Annexure, which lists the condition, we find that Condition 5 reads as follows:
If the importer follows the procedure set out in the customs (import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996.
Hence, if the parts are imported, the specified condition has to be fulfilled. As regards machinery or equipment, it is sufficient if they are listed in List 30. There is no need to prove that such machineries have actually been used in the textile industry. In the present case, according to the records, some dry cleaning machineries have been sold to buyers who are dry cleaners, agro processors. The garment calendaring machine has been supplied to laundry and dry cleaners. The appellants have contended that a narrow interpretation should not be given to the words for use in textile industry, as sometimes they have to give the goods to job workers for certain operations. We agree with this view. Before exports, it may be necessary to wash and dry-clean the garments. In such cases the drycleaners may use the dry-cleaning machine, which are listed in List 30. We cannot deny the benefit holding that a dry cleaning unit is not a textile industry and therefore, the concessional rate would not be available to them. It is precisely for this reason that no conditions have been mentioned in the Column 6 relating in the relevant Notification. So long as the impugned goods conform to the description given in the Notification, they have to be given the benefit of concessional rate of duty. A similar Notification was interpreted by the Tribunal in the case of Himson Textile Engg. Indus. Ltd. v. CC (Airport), Mumbai (supra) in the context of exemption Notification 36/96-Cus. which grants concessional rate of duty to machinery/equipment specified in List 6 required for textile industry. The observations of the Tribunal in the said decision are given below.
2. Notification No. 36/96 dated 23-7-96 grants exemption from duty in respect of certain goods. Item 146 is as follows:
Sl. No.
Chapter or heading
Description of goods
Standard rate
146
84, 85 or 90
The machinery/equipment specified in List 6,
required for textile industry
10%
3. It is not disputed that machinery which is imported by the appellant is included in the list. If that be so, there is no reason to deny the benefit of exemption under Notification 36/96 to the appellant. Whether the appellant is the actual user or not is irrelevant in this context. Apart from the above, on going through the order impugned it is seen that the Commissioner had dropped the charge against the appellant on the ground that he was not an ‘actual user’.
4. We, therefore, hold that the appellant will be entitled to the benefit of duty exemption under Notification No. 36/96. The impugned order is set aside and the appeal stands allowed.
6.2 The Tribunal had occasion to interpret Notification No. 56/88 in the case of CCE v. Q-max Equipment Pvt. Ltd. (supra). The benefit of the Notification in that case was to be extended for the goods required for manufacture of goods falling under Heading 85.42 of Central Excise Tariff Act, 1985. In that decision, initially there was difference of opinion, the Technical Member held that “required for manufacture” should be interpreted to mean that they should be actually used in the manufacture but the Judicial Member held the view that there is no need for the impugned goods to be actually used so long as it is shown by the expert opinion that it is required for use for testing of LSI/VLSI Circuit Micro Assembly… and the benefit has to be extended. In view of difference of opinion, the case was referred to the third Member who agreed with the view of the Member Judicial and held that the Notification benefit is available if it is required for the manufacture and there is no need that it should be actually used in view of absence of any end use condition in the Notification. The ratio of the above case is squarely applicable to the present case. In the above mentioned case, the Tribunal relied on the Apex Court decision in the case of State of Haryana v. Dalmina Dabri Cement Ltd. (supra)
6.3 In the case of Asean Trading Agency v. CC (supra), the benefit of exemption under Notification 224/85 Cus. dated 9.7.1985 was the main issue. When the departmental representative contended quoting Addl. Collector’s decision that the appellants are not actual users engaged in leather industry but are only stockists for sale, therefore, the Notification does not apply, the tribunal did not agree. Relying on the decision of the Apex Court in the Dalmia Darbri case the tribunal observed as follows.
15. The learned D.R. has contended, as has the Additional Collector held, that the appellants are not actual users engaged in leather industry but are only stockists for sale and the notification, therefore, does not apply. We do not agree. For one thing, the subject notification, unlike a number of others, is not conditional on production of proof of end-use. There is nothing in the notification to suggest that it does not apply to imports effected by persons other than those engaged in leather industry. We are fortified in this view by the judgment of the Supreme Court in the State of Haryana v. Dalmia Dadri Cement Ltd. 1988 (14) ECR 292 (SC). The Supreme Court was construing the following clause in Section 5(2)(a)(iv) of the Punjab General Sales Tax Act –
5(2). In this Act the expression ‘taxable turnover’ means that part of the dealer’s gross turnover during any period which remains after deducting therefrom –
(a)
(i)…
(ii)…
(iii)…
(iv) Sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (IX of 1910) of goods for use by it in the generation or distribution of such energy:
…
The submission on behalf of the State of Haryana was that in order to get the benefit of the exemption, it was required that it should be established before the tax authorities that the cement supplied by the assessee was actually used by the Board (State Electricity Board) in an activity directly connected with the generation or distribution of electrical energy. Repelling this submission, the Court observed as follows in para 10 of the Report:
10. We are unable to accept the submission of Mr. Bona that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression “for use” must mean “intended for use”. If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, “goods actually used” or “goods used”.
16. In the present instance, the notification permits exemption to penetrators imported for use in leather industry. It has been shown that the substance imported has use in leather industry as a penetrator. Proof of actual use is not a condition attached to the exemption. If it were so, the notification would have provided for execution of a bond obliging the importer to produce proof of actual use as is the case in many other notifications. We therefore do not agree with the Revenue’s contention that the benefit of exemption would not be available to the appellants since they are not engaged in leather industry but are only stockists for sale.
6.4 From the records, we find that even on 15.3.2003 and 20.6.2003 the appellants addressed letters to the Commissioner of Customs that few machines are sold to dry-cleaners/laundries/hotels and hospitals. In these circumstances, the allegation of suppression to evade duty is not sustainable. The Show Cause Notice was issued in April 2004 when the demand is for the period from April 1999 to February 2003, thus invocation of larger period is not justified. Hence, the demand is barred by limitation. No penalty is also leviable.
6.5 In summing up, we hold in the absence of end use conditions in the relevant Notifications, the benefit of concessional rate of duty cannot be denied. Moreover, the words for “use in textile industry/required for textile industry” should be not be interpreted narrowly to mean that they should be actually used in textile industry. Further, so long as the imported goods conform to the description given in the relevant lists, they are entitled for concessional rate of duty unconditionally, as no end use condition has been specified. In the result, we allow the appeal with consequential relief.
(Pronounced in open Court on 12 Jan 2007)