2006 (8) TMI 184 - SC - Customs

Revenue's fresh grounds on project import eligibility and Heading 98.01 rejected for being first raised on appeal

COMMISSIONER OF CUSTOMS, MUMBAI Versus TOYO ENGINEERING INDIA LIMITED

SC dismissed the revenue's appeal, holding that new grounds raised for the first time before the Tribunal - including absence of a registered project ... Classification of imported machinery - Whether the machinery and equipment imported by the assessee-respondent was classifiable under Heading 98.01 of the First Schedule to the Customs Tariff Act, 1975 ('the Tariff Act') and granted the benefit of Project Import under the Project Import Regulation to the assessee? Held that:- Revenue had made various submissions such as (1) that absence of a contract specifically registered for import of construction material; (2) that note (2) to Chapter 98 according to which Heading 98.01 would apply to goods which are imported in accordance with the Project Imports Regulations, 1986; (3) that under Regulation 4 the assessment under Heading 98.01 shall be available only to those goods which are imported against one or more specific contract which have been registered with the appropriate Customs House. In the absence of a specific contract being registered Heading 98.01 would not be applicable to the impugned goods imported by the respondent; and (4) that the benefit of concessional duty under Project Import was not available if the goods had arrived before the application was submitted for registration of the goods. All these submissions were not allowed to be raised by the tribunal as these submissions had been made for the first time before the Tribunal. These submissions had neither been raised before the adjudicating authority nor the first appellate authority. It was held by the Tribunal that the Department could not be allowed to make out a new case at the appeal stage. We agree with the Tribunal that the revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither adjudicating authority nor the appellate authority had denied the facility of the project import to the respondent on any of these grounds. These grounds did not find mention in the show cause notice as well. The Department cannot be travel beyond the show cause notice. Even in the grounds of appeals these points have not been taken. Appeal dismissed. Issues:Classification of imported machinery under Heading 98.01 of the Customs Tariff Act for the benefit of Project Import Scheme.Detailed Analysis:Issue 1: Classification under Heading 98.01 of the Tariff ActThe case involved the classification of machinery and equipment imported by the respondent under Heading 98.01 of the Customs Tariff Act for the benefit of the Project Import Scheme. The respondent, engaged in setting up an industrial unit, imported various construction equipment for a fertilizer plant project. The Assistant Collector and the appellate authority initially denied the benefit of project import, stating that the ownership of the imported goods would not transfer to the project authority and could be used elsewhere. However, the Tribunal held that the imported goods qualified for classification under Heading 98.01 as they were required for the initial setting up of the industrial unit. The Tribunal emphasized that the machinery aiding in the setting up of an industrial plant, including auxiliary equipment, falls under Heading 98.01. The mere possibility of using the machinery for other projects in the future does not disqualify it from availing the project import facility.Issue 2: Precedent and InterpretationThe appellant contended that a previous judgment involving Punjab State Electricity Board set a precedent against granting project import benefits under Heading 98.01. However, the Supreme Court found no merit in this argument. In the cited case, vehicles imported were not considered auxiliary equipment integral to the power project as they were only used for transportation and could be repurposed after the initial task. In contrast, in the present case, the construction equipment imported by the respondent, such as cranes, loaders, and generators, directly contributed to the initial setting up of the industrial plant. Therefore, the respondent was eligible for the project import benefit under Heading 98.01.Issue 3: Procedural ComplianceThe Revenue raised procedural objections before the Tribunal, including the absence of a registered contract for import, applicability of Chapter 98 note (2), and the timing of goods arrival concerning the application submission for registration. However, the Tribunal rejected these submissions as they were raised for the first time at the appeal stage and had not been presented before the adjudicating or appellate authorities. The Supreme Court agreed with the Tribunal's decision, emphasizing that new arguments cannot be introduced at the appeal stage and must align with the show cause notice and grounds of appeal.In conclusion, the Supreme Court upheld the Tribunal's decision, dismissing the appeal and allowing the respondent to benefit from the project import scheme under Heading 98.01 of the Customs Tariff Act. The judgment clarified the scope of auxiliary equipment, the relevance of precedent, and the importance of procedural compliance in customs cases.