Judgment:
1. This is a Revenue appeal against the Order dated 9-6-1989, passed by the Collector of Customs (Appeals), Bombay.
2. The importer had imported an item described in the Bill of Entry as "Supervac Vacuum Packaging Machine", which was classified under Chapter sub-heading 8422.40 of CTA and claimed the benefit of Notification No.125/86 and Notification No. 87/88 for auxiliary duty. The Assistant Collector of Customs found that the importers are operating in area of drugs and pharmaceuticals and they had imported the goods under provisions of Appx. 6(5) which was applicable to a R & D unit. The claim for the benefit under Sl. No: 19 of the table annexed to the Notification No. 125/86 exempted to Gas and Vacuum packaging system for flexible packages. The body of the Notification also states that it exempt the goods specified in column 2 of the Table hereto annexed and falling under Chapter 84 or Heading No. 39.20, 39.21 or 39.23 of the First Schedule to the Customs Tariff Act, 1975, when imported into India for use in processing/packaging of food articles, from - (a) so much of that portion of the duty of customs leviable thereon which is specified in the said schedule as is in excess of the amount calculated at the rate of 35 per cent ad valorem; and (b) the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act.
There are no other conditions laid down in the Notification. The importer had stated before the original authority that they had imported the machine for research and development purpose and not for processing/packaging of food articles. The importers were manufacturers of Drug and Pharmaceuticals under DGTD and were not engaged in processing/packaging of food articles. They had stated that they were going for diversification proposing marketing of processed Fruits/Vegetables. They will use the item for the same. The Assistant Collector did not find any evidence in support of this statement of the importers like Industrial Licence or letter of indent or product catalogue for new products which could be classified as "food article".
In view of the manufacturing activity being in drug and pharmaceutical field, therefore, the Assistant Collector did not accept their claim in the absence of any evidence.
3. The Learned Collector proceeded on a different footing. Before the Collector, Dr. Parekh who is the President of the company, who appeared, had explained that the importers had a scheme for marketing the food articles like chikoos, grapes, bananas, etc. which were highly perishable. He had stated that at present the wastage of these items was to an extent of 35% and the same occurred at various stages i.e.
when it was handled by the farmers, wholesale dealers, retailers and even the housewives. Packaging fruits or other food articles in vacuumised flexible packages increases the shelf life to nearly 140 days and thus prevents the loss that would have occurred if the packaging had not been resorted to. He had explained that as a result of financial benefit that would have been derived therefrom, far outweighs the cost of packaging. The said person explained that they were engaged in making various studies i.e. kind of flexible packages to be used, the cost thereof and such other alied factors before they embark upon a big scheme. It was also explained that the cost of the machine is only Rs. 62,266/- and which is big enough only for conducting studies on a pilot scale and the machine cannot be utilised for packing fruits and food articles on a commercial scale. However, it was explained that the machine can be used for packing food articles.
In this regard, the catalogue of the machine was produced which showed that the size of the chamber is 18" x 17' x 17", that the machine can pack a product, whose maximum length is 14" and that the machine had also a device for gas flushing, for packing sandwiches, cheese, etc.
The Learned Collector accepted these pleadings made before him and examining the catalogue, he found that the machine can be used for packaging fresh meat, whole hams apart from fruits and other food articles. The creation of a vacuum increases the shelf life and it can thus prevent the national waste, which occurs in respect of perishable items. He also found that the machine had a gas flushing device and it, therefore, fully meets the requirements of Sl. No. 19 of Notification No. 125/86 read with 49/88. On that reasoning, he accepted the contention for granting the benefit.
4. In this appeal, the Revenue contend that the benefit of Notification No. 125/86 is conditional which stipulates the condition that the exemption benefit is available to the goods imported into India for use in processing/packaging of food articles. It is pointed out that the Collector had taken into consideration the use of the machine and not the status of the importers whether they were engaged in the processing/packaging of food articles. It is pointed out that the machine has been imported only for Research and Development purposes and not for use in any industrial unit, engaged in processing/packaging of food articles. Therefore, the benefit in terms of said serial number cannot be extended. It is further reasoned that the accent is on the word 'for use', and the goods in the present case are for R & D purposes, which disentitle the importers from claiming the benefit of the Notification.
5. Shri A R Agarwal, the Learned DR argued the case on the basis of reasonings adopted by the Assistant Collector and the grounds made out in the appeal.
6. The Learned Advocate, Shri T Vishwanathan pointed out that the respondents were using the machine for packing cloves which is also a food article. He points out that the importers had admitted about the research activity and the utilisation of the machine for R & D purposes only. He submits that 'intended use' need not be for immediate use and even future use of the machine car be taken into consideration for the purpose of granting the benefit. In this connection, he relied on the judgment rendered in the case of State of Hanjam v. Dalmia Dadri Cement Ltd.,Preet Chattons v.Collector of Customs, 7. We have carefully considered the submissions made by both the sides and have perused the terms of the Notification and the description in Sl. No. 19 of the said Notification. The gist of the Notification and the description in Sl. No. 19 has already been extracted. It is admitted by the importers that the machine has been utilised for only research and development purposes and it is also admitted that they only plan and intend to enter into a business of marketing food articles. It is admitted that the said scheme was still under the study and development. It was also admitted by the importers that the machine is big enough only for conducting studies on a pilot scale and the machine cannot be utilised for packing fruits and food articles on a commercial scale. The terms of the Notification clearly discloses that the import of the goods should be for use in processing/packaging of food articles. It follows that this exemption is granted by the Central Government to Industry which is in existence and which is going to utilise these machines for production and marketing of goods in Indian market. Such a production and marketing of fruits results in recovery of domestic duty in the form of excise duty which is a revenue collection for the Government. Although the interpretation cannot be embarked upon the supposed intention behind the Notification for granting the exemption and which we are not doing but however, the contention of the Revenue, which requires acceptance, is that the terms of Notification being very strictly laid down, in that, it is for use in processing/packaging of food articles would mean that the industry should be in existence and not for a industry which has a scheme for entering into such business in future and are utilising such a machine for mere research and development purposes. The Learned Assistant Collector had also very clearly noted that the importers had not produced any evidence to disclose their scheme of entering into the business of manufacturing and marketing of food articles in the form of Industrial Licence or letter of indent or product catalogue for new products. It follows very clearly that the importers being a Drug and Pharmaceutical industry was only using a similar machine intended for research and development purpose and not use in any processing/packaging of food articles. There is no proof produced by the importers that the machine was not utilised for other purposes and that it was utilised only in processing/packaging of food articles even during the research programmes. The admitted position being that it is being utilised for research purpose for conduting studies on a pilot scale and the machine cannot be utilised for packing fruits and food articles on a commercial scale, therefore, it is not possible to accept the contention of the importer that they were going to utilise in future the machine for the supposed commercial and industrial activity of processing packaging of food articles, which they intended to start.
There is a lot of difference between intending to start an industry and that of carrying on research in that line as well as with use in processing/packaging for food articles. There is a possibility that such a scheme of study may fail and the importer may not enter into business in processing/packaging of food articles. Therefore, on such supposed intention of the import, a benefit meant for an existing industry cannot be granted, at this stage, specifically in respect of a machine which is admittedly not capable of undertaking processing/packaging of food articles, on a commercial scale. The citations referred to by the Learned Advocate is clearly distinguishable and do not apply to the facts and circumstances of the case, 8. In that view of the matter, we find lot of merit in the Revenue appeal and therefore, allow the same by setting aside the impugned order.