2011 (7) TMI 17 - SC - Customs

Exemption Condition No.38 applied as written; joint venture treated as legal person, actual-user test not met, appeal dismissed

M/s GAMMON INDIA LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI

SC held that the exemption condition No.38 is clear and must be applied as written; a joint venture is a legal person for the purpose of notification and ... Entitlement to the benefit of exemption under notification no. 17/2001 Customs - term 'person' - Contract in the name of Joint Venture - Import of machine by one party to the joint venture - actual user condition - Held that: - We are of the opinion that since in the instant case the language of condition No.38 in the Exemption Notification is clear and unambiguous, there is no need to resort to the interpretative process in order to determine whether the said condition is to be imparted strict or liberal construction. Status of JV - joint venture has been declared to be a legal entity in New Horizons ([1994 (11) TMI 203 - SUPREME COURT]. Contradictory decision of tribunal - Held that: - we wish to place on record our deep concern on the conduct of the two Benches of the Tribunal deciding appeals in the cases of IVRCL Infrastructures & Projects Ltd. [2004 (2) TMI 96 - CESTAT, NEW DELHI]. After noticing the decision of a co-ordinate Bench in the present case, they still thought it fit to proceed to take a view totally contrary to the view taken in the earlier judgment, thereby creating a judicial uncertainty with regard to the declaration of law involved on an identical issue in respect of the same Exemption Notification. - If a Bench of the Tribunal wishes to take a view different from the one taken by the earlier Bench, the propriety demands that it should place the matter before the President of the Tribunal so that the case is referred to a larger Bench, for which provision exists in the Act itself - Decided against the assessee. Issues Involved:1. Entitlement to the benefit of Exemption Notification No. 17/2001/Cus.2. Interpretation of the term 'person' in the context of the Exemption Notification.3. Legal status and implications of a joint venture in relation to the exemption.4. Adherence to judicial discipline and consistency in Tribunal decisions.Detailed Analysis:1. Entitlement to the Benefit of Exemption Notification No. 17/2001/Cus:The primary issue is whether the appellant, Gammon India Ltd. (Gammon), is entitled to claim the benefit of Exemption Notification No. 17/2001/Cus, which exempts certain goods from customs duty if imported by a 'person' awarded a contract for road construction by specified authorities. The Customs, Excise, and Gold (Control) Appellate Tribunal (the Tribunal) held that Gammon, as an individual entity, was not entitled to the exemption because the contract was awarded to the joint venture, Gammon-Atlanta JV, and not to Gammon alone.2. Interpretation of the Term 'Person' in the Context of the Exemption Notification:The Exemption Notification's Condition No. 38 specifies that the exemption applies if the goods are imported by a 'person' who has been awarded a contract for road construction. Gammon argued that as a partner in the joint venture, it should be considered as fulfilling this condition. The Tribunal, however, distinguished between the joint venture and its individual partners, concluding that the exemption could not be claimed by Gammon alone since the contract was awarded to the joint venture.3. Legal Status and Implications of a Joint Venture in Relation to the Exemption:Gammon relied on the Supreme Court's decision in New Horizons Ltd. vs. Union of India, which recognized a joint venture as a legal entity akin to a partnership. Gammon contended that as a legal entity, the joint venture should be considered a 'person' under the Exemption Notification. However, the Tribunal noted that the import was conducted by Gammon individually, not by the joint venture or on its behalf. The Tribunal emphasized that the supply orders and payments were made by Gammon, not from the joint venture's account, thus failing to meet the exemption's conditions.4. Adherence to Judicial Discipline and Consistency in Tribunal Decisions:The judgment expressed concern over inconsistent decisions by different benches of the Tribunal on identical issues. The Supreme Court highlighted the need for judicial discipline, stating that if a bench disagrees with an earlier decision, it should refer the matter to a larger bench rather than issuing a contradictory judgment. This principle ensures consistency and public confidence in the judicial system.Conclusion:The Supreme Court upheld the Tribunal's decision, concluding that Gammon was not entitled to the benefit of the Exemption Notification because the import was not conducted by the joint venture, which was the entity awarded the contract. The Court emphasized the necessity of strict interpretation of exemption notifications and adherence to judicial discipline. The appeal was dismissed with costs of Rs. 50,000.