HINDUSTHAN FERTILIZER CORPORATION LIMITED AND ORS. Vs. ASSISTANT COLLECTOR OF CUSTOMS FOR APPRAISEMENT, GROUP-VI AND ORS.

JUDGEMENT

(1.) The present Rule was issued on 22.5.81 at the instance of the writ petitioners viz. Hindusthan Fertilizer Corporation Limited and the Fertilizer Corporation of India Limited challenging inter alia, the orders dated 30th October, 1977, 27th October, 1978 and 4th March, 1988 as to the provisional assessment of Customs duty on the plant and machinery imported by the petitioners or either of them and for quashing of the aforesaid impugned orders. The petitioners have prayed for an appropriate writ to cancel and rescind the aforesaid impugned orders and to refrain respondents from levying and/or collecting from the petitioners any Customs duty in respect of the plant, machinery and equipment imported by the petitioners except in accordance with the Item No. 72A of 1934 Act or Heading 84.66 of 1975 Act and also to refund the sum of Rs. 61,22,415.58 p. representing the excess customs duty realized from the petitioners with interest as per particulars given in Annexure 'F to the writ petition. It is stated in details that the respondents are in rejecting the claim for concessional rate of duty made by the petitioners on the ground that they had claimed prior to the imports in question Development rebate under the Income Tax Act, 1961 and had declared before the Income Tax Authorities that they had made commercial production. According to the petitioners, the availing of the Development Rebate under the provisions of the Income Tax Act, 1961 and/or making of production from the Industrial Plant is wholly irrelevant for the purpose of deciding the claim of assessability under Item No. 72A of 1934 Act and/or Heading 84.66 of CTA 1975 Act. The petitioners have highlighted that the respondents erroneously proceeded to equate the unit of an industrial plant with that the industrial plant itself. It would be apparent on the reading of the Item 72A and Reading 84.66 that the plant, machinery and equipment etc, should be for the initial setting up of the Unit or the substantial expansion of the existing unit and not of the industrial plant as such. Even if the industrial plant is already set up but a new unit thereof is set up still machinery required for such unit for industrial plant would be entitled to assessment under the said Item No. 72A and 84.66. The commercial production or production in an industrial unit has nothing to do with the initial setting up of the Unit or substantial expansion of any existing unit of such industrial plant. Thus if all the units of an industrial plant are set up there may not be any production in the industrial plant on account of lack of power, raw material or other causes, Equally, an industrial plant may be having production still new units may be set up in it or the existing unit may be expanded.

(2.) The petitioners have stated in details that they have set up various projects all over India for the manufacture and sale of fertilizers of different types. They obtained the requisite industrial licence for setting up of the fertilizer plants at Durgapur. The plant was commissioned in 1973 but there were frequent break downs and the plant could not be run on sustained basis, the intermittent load being about 50/60 per cent. The alleged import of the units under the contract with Messrs. Ferdinand Lentjes was covered by import licence dated 11th October, 1976 which was issued by the Chief Controller of Imports and Exports, Government of India. Various Items of plants and machinery including the boiler unit which were imported from formed part of the list which were recommended by the Ministry of Fertilizer and Chemicals and which we certified by the Chief Controller of Imports and Exports. For such importation, the petitioners have paid duty provisionally assessed by the Customs Authorities and they have filed a present writ petition seeking the reliefs as indicated above on the grounds that the impugned orders are contrary to and/inconsistent with the provisions of law and there is no bar and/or impediment to grant the reliefs to the petitioner in the manner as prayed for.

(3.) The writ petition is strongly contested by the contesting respondents Customs Authorities. Mr. Bajoria, learned Counsel appearing for the petitioner has drawn the attention of the Court that the imported machinery and equipment were erected at the factory of Food Corporation of India at Durgapur. On April 4, 1974, an agreement was entered into with the approval of the Government of India with Messrs. Technimont SPA who were the Successors of Montecantini to find out the deficiency and submit their recommendations in order to ensure operation of the said units at the initial designed capacity. He has further drawn attention of the Court that in terms of Item No. 72A of the Indian Tariff Act, 1934 all items of machinery, instruments, equipments and components required for the initial setting up of a unit or the substantial expansion of an existing unit of a specified industrial plant were liable to be assessed to customs duty at the concessional rate under the said item. By notification bearing No. 32/76 dated March 16,1976 machinery and equipment falling under Tariff No. 72A of the 1934 Act for the manufacture of fertilizers and certificate by the Directorate General of Technical Development as required for the said purpose were granted exemption from customs duty in excess of 30% ad valorem. He has also submitted that with effect from August 2, 1976, the 1934 Act was repealed and replaced by the Customs Tariff Act, 1 975. The 1975 Act like the 1934 Act also provided for assessment of project imports at the concessional rate of duty. Heading No. 84.66 of the 1975 Act was similar to the Item 72A of the 1934 Act. Reference has been made to the impugned orders by the Customs Authorities and also by the Appellate Authority. The Government of India has also rejected the revisional application holding inter alia that the unit was declared to be on commercial production from October 1, 1974 before the Income Tax Department and that the petitioners could not take a different stand before another forum of the Government of India on the same set of facts and that there was a contradiction in the stand of the petitioners. It was made clear that the importation not being either for initial setting up or for substantial expansion, could not be given benefit of project import.