TaxTMI 
TaxTMI 
2015 (9) TMI 242
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....ther wires, so that even if the capacity to produce one item is increased, the over all capacity remained the same. Pursuant to this permission, the appellant registered a contract with the Customs Authorities and made imports of machinery. Vide order dated 14-1-2002, the Deputy Commissioner of Customs ordered that the Project Import Contract be deregistered and the goods imported be assessed on merits. Accordingly differential duty demand was made. The reason for denial of project import benefit was that the appellant's overall production capacity had not increased substantially to make it eligible for concession. The appeal against the said order before the Commissioner (Appeals) was rejected and the matter came before this Tribunal. The appellant contended that CTH 9801 covers Machinery etc. required for initial setting up of a unit or the substantial expansion of an existing unit of a specified Industrial Plant. The "existing unit" means the unit producing a particular item and not the industrial plant as such since as per the Project Import Regulations, 1986, "unit" means any self-contained portion of an industrial plant or any self-contained portion of a project specified und....
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....f production of wires has remained at 72600 MTs without any change. That is 72600 (63000 + 9200) prior to expansion and (52600 + 20000) after expansion. Accordingly he has held that the whole wire manufacturing portion has to be considered as a separate unit of the Borivli plant which is also supported by the Ministry of Industry's approval vide letter No. LI:550 (1992), dated 4-12-1992 wherein it has been stated as follows :- "The company would surrender a capacity to manufacture 10400 tonnes of other wires so as to retain the total license capacity of the unit at the present level of 77100 tonnes.". (2) The ld. Commissioner has examined in detail the flow chart for manufacture of wires. From the flow chart, it is seen that from the stage of wire-rod till the stage of second inspection, the process is the same, whether it is meant for stranded wires or other types of wires. For the purposes of stranding, three additional steps are required, namely, stranding, stress relieving and inspection, and thereafter packing is done which is applicable for other types of wires also. In other words, except for the three steps all other steps are common for both stranded wires and n....
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....ear by defining 'unit' as "any self-contained portion" of an industrial plant, etc." After holding so, the Tribunal remanded the matter to the Commissioner for verification as to whether the appellants have achieved the substantial expansion of that unit for which expansion was obtained. 4.3 After commissioning of the capital goods, they have achieved substantial expansion and increased the production capacity by 10400 MTs and their production during the period 94-95 to 2007-08 of stranded wires as reflected in the RT12 returns filed with the Central Excise authorities show that the production has gone up from 9890 MTs to 23871 MTs. 4.4 The finding of the Commissioner that the machinery to produce HTSNRW has been completely dismantled and instead a new machinery capable of manufacturing HTSLRW has been installed and this would not amount to substantial of the existing unit as the earlier unit was not manufacturing the present product at all is a new issue which is beyond the directions of the Tribunal and hence liable to set aside. 4.5 The stranded wire normal relaxation type and low relaxation type are one and the same and stranded wire is the genus and the....
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....xpansion of HTSLRW capacity. There is no dispute by the Revenue on the interpretation of legal provisions, viz., expansion in the capacity to produce high tensile stranded low relaxation wire unit alone was to be taken into account. 5.2 There was no capacity to manufacture HTSLR wires prior to the impugned import. The earlier product manufactured was HTSNRW which is an entirely different product technologically as well as IS specifications. . 5.3 To install the latest technology product, the machinery for the older product was removed and the new machinery was installed. Thus it was a case of modernization to set up capacity of HTSLRW by replacing HTSNRW (9600 TPA capacity) and surrendering 10400 of other wire capacity. 5.4 The Borivli plant comprised of two units, one for manufacture of Bright bars and the other for manufacture of steel wires. The appellant has tried to mislead by breaking up portion of the plant for manufacture of steel wires into two sub-units, viz., stranded wires and other wires. To deem each line of production as a unit was not acceptable. 5.5 The whole wire manufacturing portion should be considered as a .separate unit and thi....
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....nd conclusions are discussed in the ensuing paragraphs. 7.1 The most important issue for consideration is that the "Unit" which is eligible for project import benefits in the instant case, that is, whether it is the entire Borivli factory of the appellant or that portion of the factory where wires are made or that portion where stranding of wires is done. 7.2 In their application dated 7-10-1992 for industrial licence for substantial expansion at Bombay, submitted to the Secretariat of Industrial Approvals, Ministry of Industry, New Delhi, the appellant stated that their company was established in 1958 and their Borivli Plant at Bombay had the following licence, viz., 1. Industrial Licence for manufacture of various types of Steel Wires - 63,000 tonnes 2. COB licence for Bright bars - 4,500 tonnes 3. COB licence for Stranded Wires - 9,600 tonnes Total 77,100 tonnes As regards the Project, they stated that - "Technology for manufacture of Stabilised Strand has not been used in India so far and we propose to introduce this technology in our existing plant at Borivli which has got the require....
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....ial expansion dated 7-1-1992 and the Industrial Licence dated 4-12-1992 granted as indicated above, especially from the underlined portions, it is very clear that the application for substantial expansion was for the Borivli plant and the Licence was also granted for substantial of the Borivli plant. In fact what the licence envisaged was only change in the composition of products manufactured and not any substantial expansion as normally understood since the overall capacity remained the same. It is on the basis of the above Licence, the application for grant of Project Import benefits was considered by the DGTD. The recommendation of DGTD reads as follows:- "Certified that the Capital goods indicated in Column 3 above are required by Special Steels Ltd. for implementation of the substantial expansion of capacity from 9600 MTs to 20000 MTs of Low Relaxation PC stranded wires against LOI No. 550 (1992) of 4th December, 1992. Hence they are eligible for concessional rate of duty in terms of Customs Tariff Heading No. 98.01." 7.5 Thus from the above documents available on records, it is crystal clear that the substantial expansion was of the Borivli plant as a whole and no....
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....when cut. Thereafter the stranded wires are subjected to "stress relieving" which is a low temperature heat treatment to relieve the stresses. After this, inspection of the stranded wire is done to check for the breaking strength, proof stress, lay length etc. Finally the goods are packed for shipment. But for the additional three processes, namely, stranding, stress relieving and inspection, all the other processes undertaken are identical for both stranded wires and non-stranded wires. In the light of the manufacturing flow chart detailed above, it is not conceivable that there can be a separate, self-contained unit for stranded wires, when bulk of the manufacturing processes are the same for both types of wires. Thus from a technological feasibility point of view also, the question of a separate unit for stranded wires is not feasible. Further the capacity of stranded wires will naturally depend upon not only on the capacity for stranding but also on the capacity for drawing, because what is subjected to stranding is the drawn wires. Therefore, it is illogical to talk of a separate capacity for "stranding" when the said process is integrally connected to "drawing". For this reas....
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....g up of a unit. Thus the facts involved are different and distinguishable and hence the ratio of the said decision cannot be applied. As regards the Hindustan Petroleum Corporation Ltd. case, the issue for consideration was expansion of an existing unit could be construed as setting up of a new unit for the purposes of Notification No. 23/98-Cus., dated 2-6-1998. This Tribunal in the said case held that, the notification did not envisage setting up of a refinery in a new location and even setting up of new refinery in an existing location (where already another refinery existed) would not disentitle the appellants of the benefit of exemption. We do not know how this case law helps the appellant in the present case. There is no setting up of a new stranded wire unit at all. Only as part of the existing plant for manufacture of wires including stranded wires, additional machinery has been installed for making a different type of stranded wires and the overall capacity has been maintained at the existing level by allowing the appellant to dismantle old machinery. Thus, the facts are different and distinguishable from the case law relied upon and hence the said ratio cannot be applied ....
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....dition to the capacity of the products under manufacture. The product itself is being changed. Since there is no additional machinery being installed (existing machinery has to be dismantled and new machinery has to be installed in its place), the question of substantial expansion does not arise at all. Therefore, the ratio of the said decision would apply to the facts of the present case. 7.10 The scope of the expression "substantial expansion of an existing unit" appearing in the tariff entry relating to Project Imports was considered by this Tribunal in the case of National Newsprint & Paper Mills (supra) and in the said case it was held as follows : - "15. Looking at the wording of Tariff Heading No. 84.66 as it stood at the material time, it will be seen that it relates to machinery, etc. 'required for the initial setting up of a unit, or the substantial expansion of an existing unit'. What is contemplated is the substantial expansion 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 was contemplated was that a new unit should be set up....
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...., 1951". This Tribunal also considered the question as to whether recommendations of the Project Sponsoring authority are binding on the Customs Authorities and the Tribunal held as follows:- "We do not agree with the ld. Counsel for the respondents that once the Textile Commissioner has recommended the benefit of Project Imports, the Customs authorities are bound by such recommendation. In the case of Project Imports, the sponsoring authority is only a recommending authority and Customs authorities are entitled to independently apply their mind before assessment of imports." In the present case the substantial expansion has been approved by the Ministry of Industry under the Industries (Development & Regulation) Act, 1951 as can be seen from the approval letter dated 4th December, 1992 and the recommendation has been made by the sponsoring authority on the basis of such approval. Unless the said expansion results in increase in installed capacity to the extent of 25% or more of the existing capacity, the benefit of Project Imports cannot be extended. From the facts of the present case, the appellant did not have any capacity to manufacture HTSLR wires prior to 1993 and th....
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.... goods imported by the appellant has to be assessed to Customs duty on merit rates. There is no dispute raised before us regarding the quantification of Customs duty done in the impugned order. Therefore, the appellant is liable to pay the differential duty demand of Rs. 3,91,77,115/- confirmed under Section 18 of the Customs Act, 1962, on finalization of assessment. 8. In the light of the foregoing discussion, we do not find any merit in the appeal and the same is dismissed accordingly. (Pronounced in Court on 8-1-2013) Sd/- (P.R. Chandrasekharan) Member (Technical) 9. [Order per : Anil Choudhary, Member (Judicial)]. - I had the benefit of going through the order written by my learned brother Shri P.R. Chandrasekharan, Member (Technical), but with all humility, I differ with the view taken by learned Member (Technical). 10. This Tribunal in the appellant's appeal vide its earlier order dated 22-11-2004 had held that overall production capacity of the industry was altogether irrelevant as the Tariff Heading 98 speaks of expansion of an 'existing unit' of specified industrial plant (the relevant para 3 of the earlier order is quoted in para ....
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....eas in the instant case the appellants have imported machinery and installed the same in their unit for expanding the production of HTS Wires, which is undisputed. 10.5 The findings recorded by the learned Commissioner in para 15 of the impugned order that the industry in effect consists only two units is also misconstrued and wrong. The Commissioner without any basis has observed that the petitioner has only two units, one being for manufacture of Bright Bars and the other for steel wires. From a perusal of Annexure-3 of the paper book, which is an application of the appellant to the Secretariat of Industrial Approval, Ministry of Industries, Government of India, it is explicit that the industry had licence since establishment as follows: - 1. Industrial Licence for manufacture of various types of Steel Wires : 63,000 tonnes 2. COB licence for Bright bars : 4,500 tonnes 3. COB licence for Stranded Wires : 9,600 tonnes 77,100 tonnes Thus, the learned Commissioner has erred in concluding that there are only two units and there is no substantial expansion in the wires manufacturing unit by erroneously mix....
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.....L.T. A175 (S.C.)] and Reliance Industries Ltd. [1995 (80) E.L.T. 831]? OR (b) Whether the appellant is eligible for the benefit of Project Import as held by the Hon'ble Member (Judicial)? (Pronounced in Court on 7-2-2013) Sd/- (Anil Choudhary) Member (Judicial) 6-2-2013 Sd/- (P.R. Chandrasekharan) Member (Technical) 6-2-2013 14. [Order per : S.S. Kang, Vice-President]. - The following difference of opinion is referred to the Third Member: - "(a) Whether the appellant is not eligible for the benefit of Project Import and is liable to pay differential duty of Rs. 3,91,77,115/- as held by Member (Technical) relying on the decisions of this Tribunal in the case of National Newsprint and Paper Mills [1987 (32) E.L.T. 153]; Travancore Titanium Products [2002 (148) E.L.T. 640] upheld by the Apex Court [2003 (154) E.L.T. A175 (S.C.)] and Reliance Industries Ltd. [1995 (80) E.L.T. 831]? OR (b) Whether the appellant is eligible for the benefit of Project Import as held by Hon'ble Member (Judicial)?" 15. The brief facts of the case are in detail in the order passed by t....