TaxTMI 
TaxTMI 
1995 (10) TMI 85
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....dents were further permitted to expand the capacity of the said Industrial unit by installation of two circular knitting machines for manufacture of art silk knitted fabrics. By Licence dated 29-5-1975 the Government granted further substantial expansion of the installed capacity by 8 Warp Knitting machines and 8 Circular Knitting machines - corresponding to total consumption of 320 tons of caprolactum. The respondents were also further granted an Industrial Licence dated 8-6-1979 for installation of 12,500 spindles to manufacture man-made fibre yarn on worsted system. In November 84, the respondents applied for 29 preparatory and processing machines and Warp machines (12) and Circular knitting machines (21), which are production machines, indicating that the purpose of import was for modernisation/balancing and that there would be no increase in the licensed capacity. The first Licence covered various items of machinery such as Warp knitting machines, two-for-one twister, fancy yarn twister, patterning machines, etc., while the second one included only one unit of Karl Mayer stretching and Warping machine. The modernisation programme involved the replacement of 12 existing Warp kn....
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....y, to issue necessary recommendatory letter as per para 288(1) of the Hand Book of Import-Export Procedure, 1985-88 which had been acknowledged by the said office in their letter dated 21-3-1986. Under cover of the same letter they enclosed the following documents : 1.Contract No. K-50473, dated 20-9-1985 of Tsudakoma Corporation, Japan. 2.Letter of Credit No. 214/2016/86, dated 21-1-1986 of Canara Bank 3.Catalogue 4.Blue Prints of the layout of the machine 5.Continuity bond No. 30186 dated 24-2-1986 for Rs. 26.40 lakhs being 5% of the FOB value duly backed by a bank guarantee. This was the application with reference to Licence No. 2099456. By letter dated 15-10-1986 the respondents drew the attention of the said Assistant Collector to the fact that the consignment under B/E Nos. 459/13, 385/22 and 385/39 were cleared provisionally on execution of the requisite guarantee pending the receipt of the recommendatory letter from the Textile Commissioner's Office. They further informed him that the said recommendatory letter had been received by the customs authority on 10-4-1986 recommending the assessment of the goods as project import under Heading 84.66. It was a....
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.... case may be, and submits that, admittedly, the respondents did not possess an industrial licence for substantial expansion in respect of the existing industrial unit at Naroda in Ahmedabad. They had only obtained permission for replacement of existing warp knitting machines by 12 imported Raschal Knitting Machines (permission letter dated 11-9-1985 at P. 229 of Vol. II of the paper book). The Textile Commissioner's recommendation dated 11-4-1986 and clarification dated 25-9-1986, recommending benefit of assessment as Project Imports which has been heavily relied on by the lower appellate authority is not binding on the Customs authorities and cannot supersede the function of the Customs authorities who are to arrive at an independent objective satisfaction, before extending the benefit, contends the learned Counsel. What is relevant for the purpose is "installed capacity" and not production capacity. In support of this proposition, he relies upon the order of the Tribunal on actual production in the case of National News Print and Paper Mills Ltd. v. Collector of Customs, Bombay reported in 1987 (32) E.L.T. 153 (T). The Project Import Regulations require to be interpreted and sinc....
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.... Shri Rohan Shah and Shri Ashok Mehta, Advocates submits that the term "installed capacity" has not been defined in the Project Import Regulations even though the 1986 Regulations contain a definition of the term "substantial expansion". Assessment under Project Import is in the nature of exemption as it is a departure from the normal rule that goods are to be assessed on merits. The term "installed capacity" has been judicially interpreted by the Supreme Court in the case of Union of India v. Wood Papers reported in 1990 (47) E.L.T. 274 to mean productive capacity. He refers to the dictionary meaning of "instal" as "to set up in use of service" and meaning of "capacity" as "maximum possible outputs" in the Lexicon Webster Enclyclopedia Dictionary and Random House Dictionary. The Dictionary defines "capacity" as maximum possible output or production of a system of machinery or apparatus placed in position for use. 9. He contends that only if the production of the existing industrial limit has increased by more than 25% will the benefit of Project Import be available for substantial expansion and since admittedly such increase has taken place as found by the lower appellate ....
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....the case of BHEL reported in 1984 (17) E.L.T. 525 (Tri.) = 1984 ECR 1345 is squarely applicable to the facts of this case and hence Project Import benefit is available to the respondents. He cites the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo reported in 1992 (3) SCC 78. Since Headings 84.66 and 98.01 of the CTA are aimed at encouraging production, an interpretation which advances this objective and not one which defeats it, should be adopted, and in this context, he draws support from the decisions reported in 1992 (55) E.L.T. 437, 1994 (73) E.L.T. 769 and 1994 (74) E.L.T. 775. He, therefore, prays that the order of the lower appellate authority may be upheld and the appeal dismissed. 11. In a brief rejoinder, Shri M. Chandrasekharan contends that installed capacity is not synonymous with productive capacity, the IDR Act uses both terms to mean two different things. He refutes the argument of learned Counsel that `may' is to be read as `shall' by pointing out that this is to be done only where a legal right exists in a person coupled with a legal duty cast upon an authority, while in the case of Project Imports, the sponsoring authority is only a rec....
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....r substantial expansion. In terms of Note 2 to Chapter 98 of the CTA, 1975, Heading No. 98.01 is to be taken to apply to all goods which are imported in accordance with the Regulations made under Section 157 of the Customs Act, 1962 and the expressions used in this Heading shall have the meaning assigned to them in the said Regulations. Under Section 157, the Project Import Regulations 1986 were framed vide Notification No. 230/86, dated 3-4-1986 and Regulation 3(b) defines substantial expansion as "an expansion which will increase the existing installed capacity by not less than 25%". During the period when Project Imports fell under Heading 84.66, Project Imports (Registration of Contract) Regulations, 1965 were framed and even though under the 1965 Regulations, the term substantial expansion was not defined, Regulation 3(3)(c) provided for specifying the installed capacity of the proposed addition thereto, in the case of substantial expansion of an existing Plant or Project. From the above, it is clear that what is relevant for the purpose of determining the eligibility to the benefit of Project Imports is the installed capacity of the respondents. This is also the understanding....
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....knitting machines that have to be replaced. 2. That at no stage of implementation of the replacement permission the number of machines will exceed the permitted capacity. 3. That the replaced machines should not be sold without the prior permission of this office under the above control order. 4. That the replaced machines will either be scrapped in the presence of an Officer of the Regional Office of the Textile Commissioner, Ahmedabad or will be permitted to be sold to a permit holder only and not to any dealers of machinery, within six months form the date of commercial production of new machines. 5. The proposed replacement should be completed within a period of 12 months from the date of issue of this permission. 6. The details of the progress made should be submitted in the appropriate form by the mills every six months to this office till the replacement is completed. 7. This permission is issued as per para 2 of letter No. CG/454 (84) 68A (85), dated 14-8-1985 of SIA, capital goods section, Dept. of Industrial Development, New Delhi." They have relied upon letter dated 10/11-4-1986 issued by the office of the Textile Commissioner, Bombay ....
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....issible under the said notification. In this connection, your attention is drawn to para 1 of this office letter of recommendation of even number dated 10/11-4-1986, wherein it was explained as to why the mill company is entitled for duty concession against the import of the machines detailed in the said letter. Prior to the issue of Customs Notification No. 230/86, dated 3-4-1986, it was decided in consultation with the Ministry of Textiles that an increase of 20% and above in the installed production capacity would be considered as substantial expansion to become eligible for concessional rate of customs duty. When the customs notification No. 230/86 dated 3-4-1986 was issued, it was again decided in consultation with the Ministry of Textiles that the Office of the Textile Commissioner should continue to extend the facility of issuing certificate for project import concessional duty wherever the installed productive capacity increases to the extent of 25% in spinning and weaving even when it is by way of replacement and modernisation. As stated in the original letter of recommendation, the replacement of powerlooms and knitting machines with modern imported machines amount ....
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....der the Customs Notification No. 230/86, dated 3-4-1986. This has the approval of Textile Commissioner." From the Textile Commissioner's letter dated 10/11-4-1986 what is brought out is that the various machines covered under the relevant import licences are part of the Project of modernisation (emphasis supplied) and the Textile commissioner has stated that replacement of old machines with modern imported machines will bring about substantial expansion in production of man-made fibre products. However, for the purpose of the Project Import Regulations, increase in existing installed capacity is the relevant factor and not increase in production capacity. Since we are concerned with the interpretation of the term `substantial expansion' in the Project Import Regulations, we agree with the learned Additional Solicitor General that we are not required to consider the definition of the same expression occurring in the Industries Development & Regulation Act, 1951. The definition of the expression, "substantial expansion" in the explanation to Sec. 13(2) of the IDR Act cannot be considered for determining the meaning of that expression in the context of Project Imports Regulations a....
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....on of a unit, and not the substantial expansion of production of a unit. The intention behind this wording can be gauged from the reference to "initial setting up of a unit". What is contemplated was that a new unit should be set up. The concept of "substantial expansion of an existing unit" was complementary to the first part. Construed harmoniously, it would mean that it would apply to a case where there was already a unit, but an addition was made on such a scale and of such a nature as would be comparable to the setting up of a new unit. Thus, if there were already two assembly lines, the setting up of a third assembly line would be in the nature of "a substantial expansion of an existing unit". 14.1 This decision has also considered the earlier decision of the Tribunal in the case of BHEL reported in 1984 (17) E.LT. 525 (Tri.) = 1984 ECR 1345 which is relied upon by the respondents herein and distinguished in paragraphs 20 and 21 of the National Newsprint and Paper Mills Ltd. Relevant paragraphs are set out below : "Para 20. There remains the case of BHEL, on which reliance has been placed by Shri Kohli. No doubt in that case it was held that the benefit of the concessio....
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....nization and revamping do not in themselves preclude substantial expansion of an existing unit". The appellants appear to take this observation as meaning that modernization and revamping could be considered as equivalent to substantial expansion. But the words used by the Bench do not lend themselves to such a construction. One may say "a bureaucrat is not precluded from being a philosopher". This is far from saying that every bureaucrat is necessarily equivalent to a philosopher. I am, therefore, of the view that the Tribunal's order in the case of BHEL does not contain a decision that modernization and revamping are equivalent to substantial expansion, and therefore, does not support the case of the appellants." 14.2 The National Newsprint judgment (supra) also notes the earlier order of the Tribunal in the case of Saurashtra Cements and Chemical Industries Ltd. v. Collector of Customs, Ahmedabad reported in 1983 (12) E.L.T. 829 wherein the declared goods of the appellants was that their imports were only for modernisation and replacement of their existing cement plant, as in the present case, where the respondents' case is of modernisation of their textile unit. The Tribunal....
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....cessarily throw light on the manner in which the term should be understood generally. On the other hand, it is a sound, and indeed a well-known principle of construction that meaning of words and expressions used in Act must take their colour from the context in which they appear". The Court rejected the appeal of the tenant whose eviction had been ordered on the evidence of bona fide requirement by the landlord carrying on his profession as an advocate and negatived appellant's contention that practice of a legal profession was not "business" within the meaning of the above quoted Section of AP Buildings (Lease, Rent and Eviction) Control Act, and that, therefore, the landlord was not entitled to evict. In the case of MSCO (P) Ltd. v. Union of India and Others reported in 1985 (19) E.L.T. 15 (SC), it has been held that "while construing a word in a statute or statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject matter of the statute or statutory instrument understand it. It is hazardous to interpret a word in accorda....
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....roduction of a certificate from the DGTD to the effect that the chemicals imported are required for manufacture of insecticides, and fungicides was a condition in-built in Notification dated 1-3-1968. In the present case, however, the recommendation of the Textile Commissioner though of great pursuasive value is not binding upon the Customs authorities, who alone have jurisdiction to determine the eligibility for the benefit of Registration of Contract as Project Import. In this context, we may refer to para 288 of the Handbook on Import Export Procedures 1985-88 which sets out that benefit of concessional rate of customs duty under Heading 84.66 of CTA, 1975 on capital goods, connected raw materials and components imported are required for initial setting up or for substantial expansion of a Project may be allowed (emphasis supplied) by the Customs Officer on the recommendation of the sponsoring authority. We do not agree with the learned Counsel for the respondents that the word "may" occurring in the above paragraph is to be construed as "shall" since the assessment under Project Imports is in the nature of examination, entitlement to which has to be established by the importers....