2022 (6) TMI 625 - AT - Customs

Tribunal grants appeal, overturns denial of exemption benefit under Notification No. 11/97-Cus. Broad interpretation prevails.

The tribunal allowed the appeal, setting aside the order denying the exemption benefit under Notification No. 11/97-Cus. It concluded that the lower ... Benefit of exemption - scope of the term 'Machinery used for the production of a commodity' - denial of benefit on the ground that some of the key machines like Coil Winding Machine, Heat Press, Curing Drier, were not imported - Benefit of N/N. 11/97-Cus at Sr No 143 - HELD THAT:- There is no dispute that these three machines are used in process of production of the finished products namely “Electronic Plastic Film Capacitor” and these three machines were imported to augment the existing production capacity of the appellant at various stage to streamline the production process. The phrase “Machinery used for the production of a commodity.” used in Notification No 153/86-Cus., dated 1-3- 1986, was considered by the tribunal in case of LAKHANPAL NATIONAL LIMITED VERSUS COLLECTOR OF CUSTOMS, BOMBAY [1996 (11) TMI 146 - CEGAT, NEW DELHI] where it was held that it is clear that the Tribunal has categorically held that the machine should produce a commodity for considering it as a `machine for production of the commodity’. Therefore, the submissions made by the learned Advocate that all machineries means set of machines working conjointly to produce the commodity does not merit consideration. If such an interpretation is placed then all plants with series of machineries would get exempted. If the interpretation as placed by the learned Advocate is accepted then in circumstances, where a factory carries out a single process alone with a individual single machinery would get exempted. Such interpretation would create chaos and unintended benefit would flow to all factories, when the legislature has not intended to grant the benefit to machines carrying out an individual function alone without production of a commodity. In the case of COMMISSIONER OF CENTRAL EXCISE, MADRAS VERSUS KARUNA ACQUA FARMS [1997 (8) TMI 304 - CEGAT, MADRAS] it was held that the learned CCE(A) has rightly allowed the benefit of the Notifications to the appellants. Appeal allowed - decided in favor of appellant. Issues Involved:1. Denial of exemption benefit under Notification No. 11/97-Cus.2. Classification and eligibility of imported machinery for exemption.3. Interpretation of 'machinery for production of commodity' under the relevant notifications.Issue-wise Detailed Analysis:1. Denial of exemption benefit under Notification No. 11/97-Cus:The core issue revolves around the denial of the exemption benefit claimed by the appellant under Notification No. 11/97-Cus for the importation of specific machinery. The Commissioner of Customs (Appeals) upheld the original authority's decision to deny this benefit, arguing that the machinery in question did not independently produce a final commodity, namely 'Electronic Plastic Film Capacitor.' The appellant contested this decision, leading to multiple appeals and remands.2. Classification and eligibility of imported machinery for exemption:The appellant imported several machines, including an Automatic Taping Machine, Automatic Silicon Coating Machine, and Automatic Dipping Machine, classified under CTH 8479.89. The revenue authorities contended that these machines, while part of the production process, did not individually produce the final commodity and thus were not eligible for the exemption. The appellant argued that these machines were integral to the production process and should qualify for the exemption, citing excess production capacity and the necessity of these machines to streamline production.3. Interpretation of 'machinery for production of commodity' under the relevant notifications:The tribunal's interpretation of the phrase 'machinery for production of commodity' was pivotal. The lower authorities relied on the decision in the case of Lakhanpal National Ltd., which restricted the exemption to individual machines capable of producing a commodity. However, the appellant cited the Supreme Court decision in United Electrical Industries Ltd., which supported a broader interpretation, allowing a set of machines performing various functions to qualify for the exemption. The tribunal noted that the phrases used in different notifications were not identical and emphasized a broader interpretation that included machinery used in intermediate production stages.Detailed Analysis:Denial of exemption benefit under Notification No. 11/97-Cus:The Commissioner (Appeals) and the original authority denied the exemption benefit, arguing that the imported machines did not independently produce a final commodity. They referenced the decision in Lakhanpal National Ltd., which held that machines performing intermediate processes did not qualify for the exemption. The appellant's appeal to CESTAT resulted in a remand for reconsideration in light of the Supreme Court decision in United Electrical Industries Ltd., which supported a broader interpretation of the exemption criteria.Classification and eligibility of imported machinery for exemption:The appellant's machinery was classified under CTH 8479.89, and the exemption was denied on the grounds that these machines did not independently produce the final product. The appellant argued that these machines were essential for augmenting existing production capacities and streamlining the production process. They provided a Chartered Engineer Certificate to support their claim of excess winding capacity, emphasizing that the imported machines were necessary for efficient production.Interpretation of 'machinery for production of commodity' under the relevant notifications:The tribunal's interpretation of 'machinery for production of commodity' was crucial. The lower authorities' reliance on Lakhanpal National Ltd. was challenged by the appellant, who cited the Supreme Court's broader interpretation in United Electrical Industries Ltd. The tribunal noted that the phrases used in different notifications were not identical and emphasized a broader interpretation that included machinery used in intermediate production stages. The tribunal referenced several decisions, including Exide Industries Ltd. and Graver and Weil (I) Ltd., which supported a broader interpretation of production machinery, encompassing intermediate processes and not just the final commodity production.Conclusion:The tribunal concluded that the lower authorities had erred in their narrow interpretation of the exemption criteria. The broader interpretation supported by the Supreme Court and other tribunal decisions allowed for the inclusion of machinery used in intermediate production stages. Consequently, the tribunal set aside the impugned order and allowed the appeal, granting the exemption benefit to the appellant for the imported machinery.Final Order:The appeal was allowed, and the impugned order denying the exemption benefit under Notification No. 11/97-Cus was set aside. The tribunal emphasized the broader interpretation of 'machinery for production of commodity,' aligning with the Supreme Court's decision and other relevant tribunal rulings.