Case Law Details

Case Name : M/s. IVRCL Infrastructure & Projects Ltd. Vs Commissioner of Customs (Supreme Court of India)
Appeal Number : Civil Appeal No. 5282 of 2004
Date of Judgement/Order : 05/04/2015
Related Assessment Year :
Courts : Supreme Court of India (1018)

Brief Facts

The appellant entered into a Joint Venture Agreement with M/s Shapoorji Pallonji & Company Limited for the purpose of construction of roads in the State of Andhra Pradesh. The Joint Venture  was  awarded  a  contract  by  the  National Highways Authority of India for construction of roads as a  part  of  the  Golden Quadrilateral, Phase-2 Project in Andhra Pradesh. Vide a notification dated 1.3.2001, in exercise of  powers under Section 25(1) of  the  Customs  Act,  certain  items  were  exempted from  payment  of  customs  duty  and  additional  duty leviable under the Customs Tariff Act. Serial No.217 of this notification reads as follows:

“217. 84 or any other Chapter – Goods specified in List 11 required for construction of roads.”

The condition by which the exemption is attracted is set out in item 38 as follows:

 “38. If, –

a) the goods are imported by – 

i) the Ministry of Surface Transport, or 

ii) a person who has been awarded a  contract  for  the construction of roads in India by or on behalf of the Ministry  of  Surface  Transport,  by  the   National Highway Authority  of  India,  by  the  Public  Works Department  of  a  State  Government  or  by  a  road construction corporation under  the  control  of  the Government of a State or Union Territory; or

iii) a person who has been named as a sub-contractor in the contract referred to in (ii)  above  for  the construction of roads in India by or on behalf of the Ministry  of  Surface  Transport,  by  the   National Highway  Authority  of   India,   by   Public   Works Department  of  a  State  Government  or  by  a  road  construction corporation under  the  control  of  the Government of a State or Union Territory;

b) the importer, at the time of  importation, furnishes an undertaking to the Deputy Commissioner of  Customs  or  the Assistant Commissioner of Customs, as the case may  be,  to the effect that he shall use the imported goods exclusively for the construction of roads and that he shall not sell or otherwise dispose of the said goods, in any manner,  for a period of five years from the date  of  their  importation; and

c) in case of goods of serial nos. 12 and 13 of List 11, the importer, at the time of importation of such  goods,  also produces to the  Deputy  Commissioner  of  Customs  or  the    Assistant Commissioner of Customs, as the case  may  be,  a certificate from an officer not below the rank of a  Deputy Secretary to the Government of India  in  the  Ministry  of Surface Transport (Roads Wing), to the effect that the imported goods are required for construction of roads in India.”

Entry No. 1 to List 11 reads as follows:

“(1) hot mix plant batch type with electronic controls and bag type filter arrangements more   than   120   T/hour capacity.”

A purchase order was placed by the appellant on M/s Lintec GmbH & Co.KG, Germany, for supply of a hot mix plant. Lintec and the appellant decided to split the purchase order between Lintec, Germany and M/s Marshalls, Chennai. Lintec was to  supply the “critical items” required for the setting up   of  the  said plant, whereas  Marshalls  was  to  supply  various  containers, frames, ducting, tanks and a  thraw  belt  conveyer  apart  from agreeing to set up the plant after it is imported. The import  of  equipment  from  M/s Lintec was made by the appellants, who  claimed  that  the  said items fell within the scope of the exemption notification  dated 1.3.2001 and, therefore, were exempt  from  payment  of  customs duty on the same. The Customs Authorities, however, maintained that what was imported was not a hot mix plant but only certain parts of such plant and, therefore, the exemption notification would not apply. The Commissioner of Customs held that the exemption notification did not apply in this case. The assessee preferred an appeal before CESTAT which upheld the Commissioner’s order.

Contentions of the Assessee

The assessee contented that as per Rule 2(a) of the general rules for the interpretation of  the  schedule  to  the  Customs Tariff Act would make it clear that so long as essentially  the plant in question had been imported, merely  because  all  items that go into the making of such plant were  not  imported  would not matter. Further, it is clear that such imports can also be made in unassembled form. Further, the plant as a whole had been imported and only structural work had to be done by Marshalls in India and, therefore, the benefit of the exemption notification would be available.

Contentions of the Revenue

The revenue contended that as per condition 38 of the said notification, imports have to be made by a Joint Venture Company and not by one of the partners of the said company. Secondly, the exemption applies to a complete plant that is imported and not to parts/components of such a plant.

Held by Hon’ble Supreme Court of India

The Hon’ble Supreme Court stated that by following the rules of interpretation, the fact  that  an  unassembled  plant  which is incomplete but which has the essential character  of  complete plant is not the test to  be  applied  in  the  present case. On the other hand, the applicable test would be what has been laid down in a catena of decisions. In Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd., (2005) 13 SCC 789, this Court held:

“The principles as regards construction of an exemption notification  are  no  longer  res  integra;  whereas   the eligibility clause in relation to an exemption notification is given strict meaning where for the notification has to be interpreted in terms of  its  language,  once  an  assessee satisfies the  eligibility  clause,  the  exemption  clause therein  may  be  construed   liberally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning.”

Similarly in G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, this Court held:-

“It is now a well-established principle of law that whereas eligibility criteria laid down in an  exemption notification are required to be construed strictly, once it is  found  that  the  applicant  satisfies  the  same, the exemption  notification  should  be  construed   liberally.”

The Hon’ble Court stated that it is clear that a hot mix plant of the type mentioned alone is exempt from payment of customs duty. So the plant must be imported in its entirety to claim the exemption. The Hon’ble court further stated that both the oral evidence and the documentary evidence ultimately lead to the same conclusion that what was imported was not a hot mix plant that was complete in itself.

In view of the above, the appeal has been dismissed.

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