JH-Welltec Machines (India) Pvt. Ltd. Vs Commissioner of Customs (NS-I) (CESTAT Mumbai)
No Anti Dumping Duty applicable if plastic injection mould Machine was completely manufactured using Domestic Equipment
Conclusion: Anti-dumping duty (ADD) was not applicable when plastic injection mould machines(PIMM) were completely manufactured using domestic equipment. Since manufacturing activity undertaken by assessee and payment of Central Excise duty on such activity was acknowledged and not disputed by the jurisdictional Central Excise authorities, the same could not be questioned by the Customs department without any clinching evidence that such machine in question was imported into India as such or in un-assembled condition, and no further activities were undertaken thereto to complete the process of manufacture and installation etc.
Held: Assessee-company was engaged in the manufacture of Plastic Injection Moulded Machines (PIMM) and was duly registered with the Central Excise department, having jurisdiction over the factory of such manufacture of the excisable goods. PIMM was a machine used for manufacturing a wide variety of plastic products like caps of plastic bottles, automobile parts etc., by injection moulding process. For the manufacture/assembly of the PIMM, assessee had imported various parts from M/s Welltec Machinery Ltd., China. Assessee and the overseas supplier were related persons in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and accordingly, assessee got itself registered with the Special Valuation Branch (SVB), New Custom House, Mumbai for valuation of the imported equipment/parts. Assessee had also claimed that it had domestically procured certain parts and equipment for the manufacture of the complete PIMM and that it had discharged the Central Excise duty liability on the manufacture of such goods. In the matter of import of all kinds of plastic processing or injection moulding machines, an investigation was conducted by the Designated Authority (DA) in the Department of Commerce. In the preliminary findings, vide Notification No. 14/12/2008-DGAD, dated 10.02.2009, the DA had concluded that the subject goods had entered the Indian market from the subject country at prices less than the normal value in the domestic market of the exporting country. The Customs department had conducted an inquiry about horizontal plastic injection moulding machines imported by assessee. They had alleged that assessee had imported such goods from M/s Welltec Machinery Ltd., China in the guise of “parts and components” with the sole intention to evade anti-dumping duty leviable as per notification dated 12.05.2009, as amended by notification dated 23.10.2010. During the search operation at the appellant’s factory, the said officers found that in respect of past consignments, assessee had evaded payment of anti-dumping duty. The Department had concluded that assessee in connivance with its related foreign supplier had adopted various modus operandi and imported assemblies/sub-assemblies of PIMM of capacity between 90 Ton to 750 Ton in SKD/CKD condition by willfully mis-declaring and misclassifying the imported goods as parts, components and spare parts to evade ADD amounting to Rs.19,68,98,069/-. The department had proposed for rejection of the classification of imported parts of PIMM under CTI 8477 9000 /7318 1100 and classified the same under CTI 8477 1000 to confirm the demand of ADD under Section 28(4) of the Customs Act, 1962. The department had issued the show cause notice dated 28.07.2015 to assessee calling upon them to show cause as to why the subject goods seized under the provisions of Section 110, and subsequently released provisionally, shall not be confiscated under Section 111(d) and 111(m) ibid. The declared classification of the imported goods under CTI 8477 9000 / 7318 1100 should not be rejected and to be classified under CTI 8477 1000 for assessment and levy of ADD amounting to Rs.19,68,98,069/- as per notification dated 12.04.2009 and 23.03.2010; interest on the ADD payable under the disputed Bills of Entry should not be charged under Section 28AA ibid; and penalty should not be imposed on the appellants under Section 112(a) and 114A ibid. The Principal Commissioner of Customs had confirmed the proposals made in the SCN. It was held that admittedly since the PIMM, complete in all respects was manufactured in India by using the domestically procured goods also, such imported equipment, should not be subjected to levy of ADD. Therefore, the adjudged demands confirmed in the impugned order could not be sustained for judicial scrutiny. Further, it was not the case of Revenue that assessee did not pay central excise duty on the PIMM manufactured by them in their factory located in Ahmedabad. Since, manufacturing activity undertaken by assessee and payment of Central Excise duty on such activity was acknowledged and not disputed by the jurisdictional Central Excise authorities, the same could not be questioned by the Customs department without any clinching evidence that such machine in question was imported into India as such or in un-assembled condition, and no further activities were undertaken thereto to complete the process of manufacture and installation etc.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Brief facts of the case, leading to these appeals, are summarized herein below:
1.1 The appellant M/s JH-Welltec Machines (India) P. Ltd., inter alia, is engaged in the manufacture of Plastic Injection Moulded Machines (PIMM) and is duly registered with the Central Excise department, having jurisdiction over the factory of such manufacture of the excisable goods. PIMM is a machine used for manufacturing wide variety of plastic products like caps of plastic bottles, automobile parts etc., by injection moulding process. For the purpose of manufacture/assembly of the PIMM, the appellant had imported various parts from M/s Welltec Machinery Ltd., China. The appellant and the overseas supplier are related persons in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and accordingly, the appellant got itself registered with the Special Valuation Branch (SVB), New Custom House, Mumbai for the purpose of valuation of the imported equipment/parts. The appellant had also claimed that it had domestically procured certain parts and equipment for manufacture of the complete PIMM and that it had discharged the Central Excise duty liability on manufacture of such goods.
1.2 In the matter of import of all kinds of plastic processing or injection moulding machines, an investigation was conducted by the Designated Authority (DA) in the Department of Commerce. In the preliminary findings, vide Notification No. 14/12/2008-DGAD, dated 10.02.2009, the DA had concluded that the subject goods had entered the Indian market from the subject country at the prices less than the normal value in the domestic market of the exporting country; that the dumping margins of the subject goods imported from the subject country were substantial and above de minimis; and that the domestic industry had suffered material injury and the injury had been caused to the domestic industry, both by volume and price effect of dumped imports of the subject goods, originating in or exported from the subject country. On the said findings, the DA had recommended for imposition of provisional anti-dumping duty on all imports of the subject goods, originating in or exported from China. Subsequently, based on detailed investigation, the DA vide Notification dated 31.12.2009, issued from file F. No. 14/12/2008-DGAD had recorded the final findings, in confirming the preliminary findings recorded in the Notification No. 14/12/2008- DGAD, dated 10.02.2009. Pursuant to such final findings, the Central Government vide Notification No. 39/2010-Cus. dated 23.03.2010 had imposed the anti-dumping duty on ‘plastic processing or injection moulding machines’, originating in, or exported from China PR. The levy of anti-dumping duty as per the said notification was for a period of five years from the date of imposition of the provisional anti-dumping duty i.e., 12.05.2009.
1.3 In this case, the officers of Central Intelligence Unit (CIU), in the Customs department had conducted an inquiry with regard to horizonal plastic injection moulding machines imported by the appellant. They had alleged that the appellant had imported such goods from M/s Welltec Machinery Ltd., China in the guise of “parts and components” with the sole intention to evade anti-dumping duty leviable as per notification dated 12.05.2009, as amended by notification dated 23.10.2010. The consignment covered under Bill of Entry No. 8161563 dated 09.10.2012 were seized by officers of CIU on 30.11.2012. Subsequently, during the search operation at the appellant’s factory, the said officers found that in respect of past consignments, the appellant had evaded payment of anti-dumping duty. During the course of investigation, the Department recorded statements from various persons with regard to the issue of importation of the subject goods. On the basis of investigation, the department had concluded that the appellant in connivance with its related foreign supplier had adopted various modus operandi and imported assemblies/sub-assemblies of PIMM of capacity between 90 Ton to 750 Ton in SKD/CKD condition by willfully mis-declaring and misclassifying the imported goods as parts, components and spare parts with the intention of evading ADD amounting to Rs.19,68,98,069/-. It has further been observed by the department that the appellant had planned the evasion meticulously in collusion with other directors of the importing firm and representative of the related foreign supplier to suppress the actual description of the goods, by mis-declaring them as parts and components to import all essential assemblies/sub-assemblies of PIMM manufactured by the related foreign supplier in CKD/SKD condition to evade payment of ADD. On the basis of investigation, the department had proposed for rejection of classification of imported parts of PIMM under CTI 8477 9000 /7318 1100 and classified the same under CTI 8477 1000 for the purpose of confirming the demand of ADD under Section 28(4) of the Customs Act, 1962. For this purpose, the department had applied the provisions of Rule 2(a) of the General Rules for the Interpretation (GIR) to the First Schedule to Import Tariff to hold that items imported should be classified as complete PIMM. Further, the department had also entertained the belief that the appellants herein, are exposed to the penal consequences provided under the statute.
1.4 On the above backdrop of the issue, the department had issued the show cause notice dated 28.07.2015 to the appellants, calling upon them to show cause as to why the subject goods seized under the provisions of Section 110 ibid, and subsequently released provisionally, shall not be confiscated under Section 111(d) and 111(m) ibid; the declared classification of the imported goods under CTI 8477 9000 / 7318 1100 shall not be rejected and to be classified under CTI 8477 1000 for the purpose of assessment and levy of ADD amounting to Rs.19,68,98,069/- as per notification dated 12.04.2009 and 23.03.2010 (supra); interest on the ADD payable under the disputed Bills of Entry shall not be charged under Section 28AA ibid; and penalty shall not be imposed on the appellants under Section 112(a) and 114A ibid.
1.5 The matter arising out of the SCN dated 28.07.2015 was adjudicated vide Order-in-Original No. 1 15/2016-17/CC/NS-I/JNCH dated 31.01.2017 by the Principal Commissioner of Customs, NS-I, JNCH, Nhava Sheva (for short, referred to as the ‘impugned order’), wherein the learned adjudicating authority has confirmed the proposals made in the SCN. The following adjudged demands were confirmed on the appellants:
1.6 Feeling aggrieved with the impugned order, the appellants have filed these appeals before the Tribunal.
2.1 Shri Gajendra Jain, learned Advocate appearing for the appellants has submitted that the parts of PIMM imported by the appellants are classifiable on their own merits, individually and independently by virtue of Section Note 2 to Section XVI of the Customs Tariff Act, 1975 read with Rule 1 of GIR. Thus, he submitted that the provisions of Rule 2(a) of GIR shall not be applicable for determination of the ADD liability on the subject goods. He further submitted that the said rule has the application only to assembly operations and will not apply in a case, where extensive manufacturing activities are involved. Hence, he submitted that the components imported by the appellants cannot be classified as finished goods imported in un-assembled condition. In this context, he had relied upon the judgement of the Hon’ble Supreme Court, in the case of Chief Commissioner Vs. ACER India – 2004 (172) E.L.T. 289 (S.C.) and Shriram Vinyl & Chemicals Industries Vs. Commissioner of Customs – 2001 (129) E.L.T. 278 (S.C.); Order of the Tribunal in the case of LG Electronics India P Ltd., Vs. Commissioner of Customs- 2022(8) TMI 873 – CESTAT Allahabad, Ellora Time Ltd. Vs. Commissioner of Customs, Kandla – 2005 (188) E.L.T. (491) (Tri.).
2.2 Learned Advocate also submitted that even if, Rule 2(a) ibid is applicable for proceedings under Section 9A of the Customs Tariff Act, 1975, but the notification dated 23.03.2010 shall not be applicable inasmuch as import of PIMM in CKD/SKD condition was not a stipulated condition therein for levy of ADD. To support such stand, learned Advocate has relied upon the order passed by the Tribunal in the case of Anchor Daewoo Inds. Ltd. Vs. Commissioner of Customs, Kandla – 2007 (214) E.L.T. 230 (Tri. – Ahmd.), which was upheld by the Hon’ble Supreme Court [2016 (331) E.L.T. A138 (S.C.)], in dismissing the Civil Appeal Nos. 5999-6000 of 2007 filed by the Commissioner of Customs, Kandla. Further, learned Advocate has also relied upon the judgements delivered by the judicial forum in the case of Wipro Limited Vs. Commissioner of Customs, Chennai – 2007 (217) E.L.T. 558 (Tri. – Chennai); Philips India Ltd. Vs. Commissioner of Customs, Mumbai – 2004 (166) E.L.T. 49 (Tri. – Mumbai); Plaza Lamps and Tubes Ltd. Vs. Commissioner of Customs – 2007 (209) E.L.T. 182 (Del.) and Delta Electronics Vs. Commissioner of Cus. & C. Ex., Meerut – 2012 (283) E.L.T. 68 (Tri. – Del), to state that notified goods alone should be subjected to levy of ADD and not the parts and equipments imported for manufacture/assembly of such machine/ machinery.
2.3. Learned Advocate further submitted that the appellants had also procured substantial parts from within the country for carrying out the manufacturing activity in their factory premises. He has referred to the item ‘Base Frame’, one of the important parts, to say that the same was procured locally and that without such base frame, it is impossible to conceive the idea of manufacture of the PIMM. To support such stand, learned Advocate has referred to the certificate issued by the IIT Professor and contended that without locally procured goods and activities undertaken in India, it is not practically possible to conceive the imported goods as constituting the PIMM. With regard to the opinion furnished by the IIT Professor, learned Advocate submitted that such opinion was given in the capacity of an expert in the field and the same has not been challenged otherwise by the adjudicating authority. Thus, he submitted that the opinion furnished by the Expert in the field must be given due credence and should not be ignored, without proper substantiation of the case. In this context, he had relied upon the judgement of the Hon’ble Supreme Court in the case of Commissioner of Customs, Mumbai Vs. Konkan Synthetic Fibres – 2012 (278) E.L.T. 37 (S.C.), BPL Pharmaceuticals Ltd. Vs. Commissioner of Customs 1995 (77) E.L.T. 485 (S.C.) and the order of this Tribunal passed in the case of Diamond Cements Ltd, Vs. Commissioner of Central Excise – 2012 (283) E.L.T. 226 (Tri.), to state and submit that opinion of an expert in the field of trade, who deals in subject goods, should not be ignored and should be given due importance.
2.4 As regards the certificate of Chartered Engineer M/s Sai Siddhi Associates, relied upon by the Revenue for confirmation of the adjudged demands, learned Advocate submitted that the said certificate cannot at all be relied upon and that, if the said certificate is considered, then it goes in appellants’ favour, inasmuch as it has been specifically confirmed therein that ‘assemblies presently imported contribute to approximately 25% to 30% of the respective complete unit’ i.e., PIMM.
3. Shri Ashwin Kumar, learned Authorised Representative (AR) appearing for the Revenue submitted that the adjudged demands confirmed in the impugned order are in conformity with the statutory provisions. In this context, he submitted that the appellants had imported complete PIMM by mis-declaring the same as parts, spare parts, components, sub-assemblies and assemblies of complete machine, with the malafide intention to evade payment of ADD, levied under Sl. No.12 of the table appended to notification No.39/2002-Cus. dated 23.03.2010. He further submitted that the levy of ADD is on PIMM classifiable under CTI 8477 1000. He also submitted that the chartered engineer M/s Sai Siddhi Associates had issued the certificate only in respect of the consignment covered under the B/E No. 8161563 dated 19.12.2012. With regard to other consignments covered under separate bills of entry, he submitted that since, the department upon proper analysis, had confirmed that the same are assemblies/parts of the PIMM, which are simply to be fitted with the help of nuts and bolts, the appellants are liable to pay ADD in terms of the notifications issued by the Designated Authority, considering the imported consignments as a complete machine by itself. Learned AR has relied upon the conversations made through e-mail and skype between the parties to the contract and claimed that the base frame parts, controller, hydraulic motors, valve hydraulic hose etc., were in fact imported by the appellants for mere carrying out the activity of assembling the same within the factory premises. Therefore, he submitted that since the vital components were imported by the appellants, just for the purpose of assembly of PIMM, it cannot be said that those vital items were sourced by the appellant locally in order to complete the process of manufacture of PIMM. To strengthen the case of Revenue, that the subject goods imported by the appellants are liable for payment of ADD, the learned AR has relied upon the Order of this Tribunal in the case of Ankit Asthana Vs. Commissioner of Customs (Import), Nhava Sheva – 2015 (327) E.L.T. 162 (Tri. – Mumbai). Thus, he contended that confirmation of the adjudged demands against the appellants are sustainable under the law.
4. Heard Shri Gajendra Jain, learned Advocate, Shri Ashwin Kumar, learned AR and examined the case records, including the written notes submitted by both sides.
5. Learned Advocate appearing for the appellants prayed for abating the appeal being No. C/85991/2017 on the ground that the appellant Sanjay Kumar M Sutariya had expired on 25.02.2023. We have also perused the death certificate dated 16.03.2023 issued by Amdavad Municipal Corporation, certifying that Sanjay Kumar Mithabhai Sutariya died on 25.02.2023 and the case was registered vide Sl. No.190 in the record of the Corporation. Since, the deceased appellant is no more in existence, the appeal filed by him should abate in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982. Accordingly, the appeal filed by him abated.
6.1 The Directorate General of Anti-Dumping and Allied Duties, in the Ministry of Commerce & Industry, Government of India had initiated anti-dumping investigation, concerning import of ‘Plastic processing machinery’, originating from China PR. The said proceedings were initiated pursuant to the application filed by M/s L&T Demag Plastic Machinery Ltd., Chennai. In the Notification dated 08.07.2008, issued from file F. No. 14/12/2008-DGAD, the authorities had initiated investigation proceedings, concerning the products i.e., “all kinds of plastic processing or injection moulding machines, also known as injection presses, having clamping force not less than 40 tonnes, used for processing or moulding of plastic materials”. On primary round of investigation into the matter, the Designated Authority had submitted its preliminary findings by Notification No. 14/12/2008-DGAD dated 10.02.2009, with the conclusion that (a) the subject goods had entered the Indian market from the subject country at prices less than their normal values in the domestic market of the exporting country; (b) the dumping margins of the subject goods imported from the subject country were substantial and above de minimis; (c) the domestic industry had suffered material injury and the injury had been caused to the domestic industry, both by volume and price effect of dumped imports of the subject goods, originating in or exported from, the subject country. On the basis of such preliminary findings, the Designated Authority had recommended for imposition of provisional anti-dumping duty on all imports of the subject goods, originating in or exported from, the subject country, i.e., China PR.
6.2 On the basis of such recommendation (supra), the Central Government, in exercise of the powers conferred by sub-section (2) of Section 9A of the Customs Tariff Act, 1975, read with the Rules 13 and 20 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, had issued the Notification No.47/2009-Customs dated 12.05.2009, in imposing an anti-dumping duty @ of 223% of the C.I.F. value of imports of the subject goods. Such imposition of ADD was on provisional basis. Subsequently, on detailed investigation into the matter, the Designated Authority had issued the notification dated 31.12.2009 (from file F. No.14/12/2008-DGAD), in recording his final findings. Vide the said notification, the Designated Authority had recommended for imposition of definitive anti-dumping duty on the subject goods, imported from China PR. Pursuant to such notification, the Central Government vide Notification No.39/2010-Cus. dated 23.03.2010 had finally imposed the anti-dumping duty.
7. On conjoint reading of the notifications issued by the authorities in both the Ministries i.e., Ministry of Commerce & Industry and the Ministry of Finance, it makes the position clear that the authorities had intended to levy anti-dumping duty on the plastic processing or injection molding machines originating in, or exported from China PR. In other words, when such machine is imported in ‘as it is condition’ or ‘in CKD/SKD condition’ (without any further value addition thereto), then the same are liable for payment of anti-dumping duty. The appellants herein, had claimed that they had manufactured the PIMM (an excisable commodity), out of the imported and locally procured parts and components and that on such manufacturing activity, they had discharged appropriate Central Excise duty liability. The details of the imported/indigenously procured goods, as submitted by the appellants in the tabular form, are extracted herein below:
8.1 During the course of inspection of the imported goods covered under the B/E No. 8161563 dated 09.10.2012, the Customs Department had engaged the Chartered Engineer M/s Sai Siddhi Associates, who on inspection of the goods, vide certificate dated 09.11.20 12 had confirmed that the goods are assemblies for injection molding machines and not parts as such, as declared in the import documents. Further, vide paragraph 3.1 in the said certificate, the Chartered Engineer had commented on the subject goods imported by the appellants, as under:
“We also confirm that even if all the above tabulated Assemblies are assembled altogether, they do not form either of the complete injection moulding machine. Rather we on our past experience on similar type of goods opine that the Assemblies presently imported contribute to approximately 25% to 30% of respective the complete units.”
(emphasis supplied)
8.2 Further, to inspect the goods and for confirmation of the fact as to whether, the import component thereof should alone be considered as the complete PIMM or otherwise, the appellant had engaged Shri K.P. Karunakaran, Institute Chair – Professor of Mechanical Engineering, in the Indian Institute of Technology, Bombay. Upon in-depth study of the process, the following technical opinion dated 02.08.2016 was furnished by the said expert Professor:-
“To Whomsoever It May Concern
Technical Opinion on Plastic Injection Molding Machines (PIMMs)
After almost a decade of industrial experience in Hindustan Aeronautics Limited since 1984 specializing in the areas of CNC technology and sheet metal manufacture, I took up teaching and research career in IIT Bombay in 1994. I am presently an Institute Chair Professor in the Department of Mechanical Engineering. My areas of interest are CNC Technology, Manufacturing Automation, 3D Printing, Computer Graphics and Innovating Product Development. Application of 3D printing to produce injection molds with conformal cooling channels is one of my specializations.
I visited JH Welltech Machines (India) Pvt. Ltd., Ahmedabad, along with a research scholar on March 23, 2016 (Wednesday). We studied the Plastic Injection Molding Machines (PIMMs) being manufactured in their premises. We also visited a nearby factory where it was in use and witnessed its operations.
JH Welltech imports certain parts like clamping unit, injection unit, servo drive, etc. They also domestically procure vital parts like machine base frame, PLC, hydraulic valves etc. In our opinion, it is not possible to conclude that the imported goods per se would constitute complete PIMM since without domestically procured parts and components, the imported goods cannot form a machine by any stretch of imagination. A detailed report is enclosed as Annexure-I to justify our opinion.”
(emphasis supplied)
Further, Shri K.P.Karunakaran, in his technical opinion (supra) had also discussed about design, manufacture of PIMM and also its important sub-systems such as base frame, clamping unit, heating system, hydraulic system, PLC system etc., in forming the part of or participation in the manufacture of final product i.e., PIMM. Upon detailed study of the function of various machines, the said Professor in his opinion dated 02.08.2016, had concluded as follows:
“In our view, the significance of the domestically procured parts & the activities undertaken by JH Welltech in their premises cannot be ignored while judging the emergence of the complete PIMM. The contributions of the indigenous parts of the PIMM manufactured in India are as vital as the imported ones. The activities in India are also substantial. Furthermore, there are continuous efforts in the company to indigenize more and more parts like electrical cabinet, tie bars, cylinders etc. While PIMMs are very important machine tools in view of the ever increasing use of plastic parts, there are very few players today.
In our opinion, JH Welltech do not simply assemble the imported parts and make the complete PIMM; they use several vital indigenous parts for making it. In our opinion, it is not possible to conclude that the imported parts by themselves constitute a complete PIMM. In other words, without the locally procured goods and the activities undertaken in India, it is impossible to conclude that the imported goods per se can be called as a complete PIMM.”
(emphasis supplied)
8.3 The appellant had also engaged another Chartered Engineer M/s A.G. Associates to study the process of manufacture of PIMM and the constituent parts used for manufacture of the same. Upon detailed study of the manufacturing process and on consideration of the technical parameters, the said Chartered Engineer vide its certificate 10.05.2016, had confirmed that “an injection molding machine comprises of thousands of small and big parts and components of which the major are imported by the manufacturer. However, there are also some major and minor parts and components which are being locally purchased by the manufacturer. … Of the goods locally purchased the most crucial component / assembly is the base frame, which plays a vital role in the assembly/manufacturing of any particular injection molding machine.”
8.4. Furthermore, the financial aspects of the appellants’ company were also verified by M/s Avtar & Bhavesh, Chartered Accountants, who vide certificate dated 25.01.2016 had provided the details of cost of machine manufactured by using both domestic/imported parts. The certificate together with the cost sheet (both value and quantity wise) attached thereto, are extracted herein below:
