TaxTMI 
TaxTMI 
2005 (8) TMI 657
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....ls, allowed three appeals filed by the Company and its two Directors and dismissed two appeals filed by the Commissioner of Customs. CEGAT set aside the Order in Original passed by the Commissioner of Customs, New Delhi on December 30, 1997. 2. To appreciate the controversy raised in the present appeals, relevant facts as noted in the Order in Original by the Commissioner of Customs may be stated in brief. 3. According to the Commissioner of Customs - appellant herein, M/s. Pearl Engineering Polymers Limited ('Company') was registered under the Companies Act, 1956. Mr. Chand Seth was the Chairman-cum-Managing Director of the Company and Mr. Arun Gupta was whole time Director. The Company was engaged in the manufacture of Polyester Chips (High Pressure and Molding Grades) and other Polyethelene Terephthlate (PET) Bottle Grade and Film Grade since 1995. For the purpose of the said products, the Company set up a plant at Kurkumbh, District Pune in the State of Maharashtra. The plant had been set up on the basis of the technical know how. For that the Company entered into a 'Know how' and 'Basic Engineering Agreement' with M/s. Zimmer AG of Germany ('Zimmer' for short) ....
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....on 28(1) of the Customs Act, 1962; an amount of Rs. 20,00,000/- deposited by the Company voluntarily should not be adjusted against the duty demanded; the goods i.e. drawings, designs, plans etc. imported in three consignments having a total assessable value of Rs. 7,98,33,370/- should not be held liable to confiscation under Section 111(m) of the Act and penalty should not be imposed on each of them under Section 112 of the Act. 6. Mr. Chand Seth, Chairman-cum-Managing Director of the Company replied to the show cause notice stating therein that he being the Chairman-cum-Managing Director of the Company was not involved in day-to-day functioning of the Company which was taken care by Executives and other employees of the Company. As the Chairman-cum-Managing Director, overall policy decisions were taken by him. He was, hence, not liable to penal action under Section 112 of the Act as he was not involved in the actual import of drawings, designs, plans, etc. 7. Mr. Arun Gupta, Director of the Company, in his reply, contended that Know how and FEEP were procured through courier after declaration to Customs Authorities and one of the consignments was sought to be clea....
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.... 49.11, full exemption was granted. Thus, notwithstanding the fact that FEEP could be classified under Chapter Heading 49.11, in view of they being "Book" were covered by Exemption Notifications and there was no liability of the Company to pay custom duty. Reference was also made to HSN notes and it was submitted that Drawings, Designs and Plans could be classified as Printed Books by virtue of Interpretation Rules of 1988. The entire FEEP, therefore, could be exempted and there was no substance in the allegation of the department that the Company was liable to pay custom duty. Objections were also raised as to limitation and on valuation. 9. The case of the department, on the other hand, was that FEEP and Drawings, Designs and Plans ought to be classified under Chapter Heading 49.11. As they could neither be covered by 4911.10 (Trade Advertising Material, Commercial Catalogues and the like) nor by 4911.11 (Pictures, Designs and Photographs), the relevant entry was sub-heading 4911.99 (Others) and was liable to pay customs duty at 25%. 10. The Commissioner of Customs considered the averments of the department and the reply submitted by the Company and by Mr. Gupta. ....
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....th." 12. Being aggrieved by the Order in Original passed by the Commissioner of Customs, five appeals came to be registered before CEGAT. One appeal was preferred by the Company against the decision of the Commissioner holding that the goods were liable to payment of custom duty and not covered by Chapter Heading 4901. Two appeals were filed by Mr. Chand Seth, Chairman-cum-Managing Director and Mr. Arun Gupta, Director against payment of penalty of Rs. 50,00,000/- and Rs. 25,00,000/- respectively. Two cross appeals were filed by the Department against quantum of penalty imposed on Mr. Chand Seth and Mr. Arun Gupta contending that the penalty imposed by the Commissioner of Customs was inadequate and was required to be enhanced. 13. CEGAT took up for consideration all the appeals. It observed that an identical question come for consideration before a Larger Bench of CEGAT in Parasrampuria Synthetics Ltd. v. Commissioner of Customs, New Delhi, 2000 (119) E.L.T. 211 = (2000) 38 RLT 846 (LB). It noted that the Larger Bench was faced with the issue as to whether the law laid down by a two-member Bench in Tractors & Farm Equipment Ltd. v. Collector of Customs, 1993 (68) E.....
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....ed upon the decision rendered by this Court in A.C.C. v. Commercial Tax Officer, (2001) 4 SCC 593. Considering the aforesaid two decisions, there appears some conflict in the ratio laid down in both the cases. Hence, these appeals are referred to a Larger Bench. Registry to place the papers before Hon'ble the Chief Justice of India for appropriate direction in this regard to place it before an appropriate Bench." 15. That is how the matters were placed before us for final hearing. We have heard learned Counsel for the parties. 16. At the time of hearing of appeals, the learned Counsel for the appellant stated that three questions arise for consideration of this Court : (i) Whether the goods imported by the Company in the form FEEP (Front End Engineering Package) comprising of technical documentation, designs and drawings are classifiable under Chapter sub-heading 4911.99 of the Customs Tariff? (ii) Whether the goods imported by the appellant in the form of know-how containing latest up-to-date technical data and information including secret technical knowledge relating to the processes and their employment ....
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....ter was referred to a three Judge Bench. It was, therefore, submitted that the appeals deserve to be dismissed by confirming the order passed by CEGAT. 19. In the alternative, it was submitted that since CEGAT allowed the appeals filed by the Company, Chairman-cum-Managing Director and Director relying upon a Larger Bench decision in Parasrampuria Synthetics Ltd. holding that the goods imported by it could be said to be "Books" and hence were exempted from payment of excise duty, other points though argued and pressed into service at the time of hearing were not considered. It was, therefore, submitted that in case this Court holds that the contention raised by the Department is well founded and the order passed by CEGAT are liable to be set aside, the matters may be remitted to CEGAT directing it to consider all the points and to decide them in accordance with law. 20. The question for consideration before us is whether the goods and materials imported by the Company in the form of FEEP comprising of Equipments, Drawings, Designs and Plans are classifiable under Chapter Heading 49.01 or 49.06 of Schedule I of the Customs Tariff Act, 1975 and the Company is entitled....
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....ncluding printed pictures and photographs 49.11.10 - Trade advertising material, commercial      catalogues and the like 25% 4911.91 - Pictures, designs and photographs 25% 4911.99 - Other 25% 23. The relevant notifications are Notification Nos. 107/93-Cus., dated March 30, 1993 and 38/94-Cus; dated March 1, 1994. The relevant part of Notification No. 107/93-Cus. reads as follows : "Exemption to specified goods of Chapters 49 and 97 In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of finance (Department of Revenue) No. 36/93 - Customs, dated the 28th February, 1993, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in Column (3) of the Table hereto annexed and falling within the Chapter or under the heading No. of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), as specified in the correspon....
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.... Effective rates of duty for specified goods of Chapters 40, 41, 44, 47, 48 and 49. - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in Column (3) of the Table hereto annexed, and falling within Chapter, heading No. or sub-heading No. of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in Column (2) of the said Table, when imported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in Column (4) of the said Table, subject to the condition, if any laid down in the corresponding entry in Column (5) of the said Table. S. No. Chapter or heading No. of sub heading No. Description of Rate goods Conditions 9. ............ ............ ............ 10. 49. Printed books (including covers for printed books) and printed manuals including those in loose-leaf form with ....
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.... and sets of newspapers, journals or periodicals comprising more than one number under a single cover, whether or not containing advertising material. (2) Bound picture books (other than children's picture books of Heading 49.03). (3) A collection of printed reproductions of works of art, drawings, etc. with a relative text (for example, a biography of the artist), put up with numbered pages and forming a whole suitable for binding. (4) A pictorial supplement accompanying and subsidiary to a bound volume containing the relative text." 27. A question similar to one with which we are concerned came up for consideration before the authorities in Parasrampuria Synthetics Ltd. The Central Excise Authorities held that Drawings, Designs and Plans imported by the Company could not be said to be "Books" within the meaning of Chapter Heading 49.01 but would be covered under sub-heading 4911.99 and hence were liable to custom duty. The demand made by the authority, therefore, came to be confirmed by the Commissioner of Customs. Being aggrieved by the order passed by Commissioner, the Company approached CE....
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....oning in and conclusion arrived at in those cases. It was also submitted that a similar point came for consideration before this Court in Scientific Engineering House Ltd. and this Court in the light of the provisions of the Income Tax Act, 1961, held that drawings and designs would come within the term 'book' and hence, would be said to be 'plant'. It was also submitted that the High Court of Gujarat in Elecon Engineering Ltd. considered the question and decided in favour of the assessee. The observations of the High Court of Gujarat had been approved by this Court in Scientific Engineering House Ltd. The Division Bench of this Court in Parasrampuria Synthetics Ltd. misinterpreted and misapplied the ratio laid down in that case and erroneously held that the decision in Scientific Engineering House Ltd. does not support the Company. On the contrary, the observations in that case supported the case of the Department. It was urged by the learned Counsel for the assessee that the decision of the Division Bench in Parasrampuria Synthetics Ltd. is also not in conformity with the decision of three Judge Bench in Associated Cement Companies Ltd. v. Commissioner of Customs, (2001) 4 SCC 59....
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....ssigned its natural meaning as understood in the common parlance, subject, of course, to the context in which it was used. The Court stated; "We will first consider the question whether drawings and patterns acquired by the assessee are "books", for the inclusive definition of the word "plant" in Section 43(3) of the Act expressly declares that "books" used for the purposes of the business or profession of the assessee, that is, used for the purpose of enabling the assessee to carry on his business or profession and earn income therefrom, are "plant" within the meaning of Section 32. Now, the word "book" has not been defined in the Act and it is not a term of art. It is an ordinary English word of everyday use and it must, therefore, be assigned its natural meaning as understood in common parlance subject, of course, to the context in which it is used here." 34. In popular sense, "book" means a collection of a number of leaves or sheets of paper or of other substance, blank, written or printed, of any size, shape and value, held together along one of the edges so as to form a material whole and protected on the front and back with a cover of more or less durable material....
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....e books. The factors leading me to that conclusion are these : The volumes are in book form; to the outward eye they look like books, and in the ordinary course they can be, and are, handled like books. Next, I observe that they can be used like books, in the sense that, as one turns over the sheets, one can, if able to decipher the handwriting, read the various letters as a collection of letters bound up in the books. I observe further that they are not detachable letters in the ordinary sense, but have been so inserted in the sheets that they are in substance permanent parts of the volumes, unless, indeed, they should be cut out or removed by some forcible effect." 36. A similar question came up for consideration before this Court in Scientific Engineering House Ltd. referred to above. In that case, the assessee entered into collaboration agreement for manufacture of scientific instruments. The collaborator was to supply technical know-how by drawings, designs, charts, plants, etc. The question was whether those documents in the form of "documentation service" under the agreement could be said to be 'book' and 'plant' within the meaning of the Income Tax Act and whether t....
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....hnical know-how in the shape of drawings, designs, charts, plans, processing data and other literature fell within the connotation 'plant' and, therefore, a depreciable asset. The Court referred to Elecon Engineering Co. Ltd. and said; "Counsel invited our attention to the decision in CIT v. Elecon Engg. Co. Ltd. where the Gujarat High court has, after exhaustively reviewing the case law on the topic, held that drawings and patterns which constitute know-how and are fundamental to the assessee's manufacturing business are 'plant'. we agree and approve the said view".   (emphasis supplied) 42. It is, no doubt, true that in Parasrampuria Synthetics Ltd., a two Judge Bench of this Court reversed the decision of CEGAT and held that Drawings, Designs and Plans imported by the assessee from Zimmer under an agreement for transfer of technology for setting up a plant to manufacture specified goods could not be said to be 'book' and hence was not covered by Chapter Heading 49.01 nor exempted under notification of 1975. It is also true that the Court considered both the decisions, viz., Scientific Engineering House Ltd. decided by this Court and Elecon Engineering Co. Lt....
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....self thus indicative of not being a work of art by an author - it is a record of scientific progress achieved and this particular achievement is being transferred by way of transfer of technology agreement between the two parties and thus cannot but be termed to be a "technical know-how in the shape of drawings, designs, charts, plans and other literature" - these items have been ascribed to be a part of the plant for the purposes of depreciation allowance in terms of Sections 32 and 43(3) of the Income Tax Act. Merely by reason of the factum of certain writings on various sheets of paper, one cannot ascribe the documentation to be a "book". The word "book" has not been defined in the Act but the "book" in common acceptation is a literary composition from which one may extend or advance his or her knowledge and learning." 44. As to Elecon Engineering Co. Ltd., it was stated; "Incidentally, the decision of the High Court of Gujarat in the case of CIT v. Elecon Engg. Co. Ltd. has been strongly relied upon by the Tribunal and it has also been recorded in the order impugned that the decision was subsequently approved by this Court. While it is true that Elecon Engg. stands a....
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....number of sheets bound together and used for making entries, as of commercial transactions; a pile or package of leaves, as of tobacco; a trick at cards, or a number of cards forming a set; bridge, six tricks taken by one side." 49. According to Words and Phrases (Permanent Edition), "A "book", in its popular sense, is understood to be a volume, bound or unbound, written or printed." 50. In our opinion, the Counsel is right in submitting that when the expression 'book' is not defined in the Act, natural and ordinary meaning of the said expression must be kept in view. According to him, nowhere it is provided that all the nine characteristics or ingredients as highlighted by the learned Attorney General in Parasrampuria Synthetics Ltd. and referred to by this Court in paragraph 10 must be considered essential or sine qua non. He, therefore, submitted that a wrong test was applied by this Court in Parasrampuria Synthetics Ltd. and Scientific Engineering House Ltd. was erroneously distinguished. The proper way on the part of the Court was to consider the test laid down in Scientific Engineering House Ltd. and to come to a conclusion whether on the facts and in th....
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....llong v. Wood Craft Products Ltd. - 1995 (77) E.L.T. 23 (S.C.) = (1995) 3 SCC 454. The Court, in that case, considered the question whether 'plywood' was classifiable under sub-heading 4408.90 or sub-heading 4410.90? HSN Explanatory Notes was considered by this Court and it was observed; "We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression "similar laminated wood" in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on th....