| SooperKanoon Citation | sooperkanoon.com/6432 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | May-09-1991 |
| Reported in | (1991)(56)ELT114TriDel |
| Appellant | Universal Cables Ltd. |
| Respondent | Collector of Customs |
They claimed the benefit of the concessional rate of customs duty as laid down under Notification No. 345/86-Cus dated 16-6-1986 (Sr. No. 45 of the table of the said notification) which has been denied by the lower authorities and hence the appeal.
2. The Assistant Collector of Customs rejected the claim of the appellants on the following grounds - (i) Licence No. l/5(8)-5/EEl/61 dated 6-9-1961 for (a) Paper/Metallised polypropylene film capacitors and As per these licences and the details mentioned in the letter No. 1660 (86) IL-SCS dated 20-4-1987 addressed to the importer by the Department of the Industrial Development that plastic film capacitors and power capacitors are two entirely distinct and distinguishable entities.
3. In the Import and Export Policy 1988-91, all types of Plastic film capacitors appear under Sr. No. II(6) (ii) of Entry No. 831 of Appendix 6, list 8, part 1 whereas power capacitors all types, except community type, find a mention against entry No. 592 of Appendix 3, Part A. Hence power capacitors and plastic film capacitors have been differenciated from each other in the context of Import Policy also.
4. Plastic film capacitors are made of plain or metallised plastic film and foil. They are miniature in size. Their capacitors is very low.
They are mainly used for by-pass/filteration compling in electronic equipments/TV/Radio/computer, etc. Power capacitors are big in size.
They are assembled in metal boxes and filled with epoxy and their capacitors is very high (1 KVR and above). They are mainly used in reduced power factor in 3 phase. The Asstt. Collector has accepted the position that use of paper has been replaced by plastic film in the manufacture of power capacitors, however, he has held that this fact by itself does not mean that power capacitors are plastic film capacitors.
5. Goods under Bill of Entry No. 11651 dated 24-5-1990 and 1264 dated 28-6-1990 is Hazy PP film which cannot be treated as plain PP film.
6. The appellants in their appeal before the Collector (Appeals) Bombay filed the following documents and literature in support of their case and assailed the findings of the Asstt. Collector in order-in-original - 1. Indian Standards No IS-2834/1986 regarding specification of shunt capacitors for power capacitors; 2. Letter dated 9/12-2-1990 from Small Industries Service Institute to M/s. Shreem Capacitors (P) Ltd.; 3. Letter No. 5/r-968/87 ERC dated 27-12-1987 issued by Trade Enquiry Officer, New Customs House, Bombay to M/s. Malde Capacitors Manufacturing Co.
7. Paper on Development of High Voltage all film Power capacitors by S. Cesasi and Ors.
8. Article titled 'Advance in Power capacitors Technology' by L.E. Booh and G.R. New Comb 9. Paper presented by D.G. Shahw and others titled 'A Changing capacitor Technology in Failure Mechanism and Design in narrations'.
11. Product catalogue of General Elective of USA giving the construction of all film (Plastic film) dielectric capacitors.
12. Test report from Central Power Research Institute (Govt. of India undertaking) for a high voltage capacitor unit.
7. On consideration of these materials, the Collector (Appeals) has rejected the appellants claim but, however, he has also disagreed with the Assistant Collector on the finding that Hazy P.P. film and plain P.P. film are not one and the same. He has held that "P.P. film (Hazy)" would also constitute a part of "plain P.P. film category". He has observed that the technical literatures and. trade acceptance only recognises the distinction as between "smooth" and "Hazy" film and both these categories would constitute parts of the generic 'plain' P.P.film.
8. After examining the various technical literature, the learned Collector has given a finding that capacitors using polypropylene films as dielectric are also referred to as a category in the power capacitor technology.
(i) the reference contained in Import Export Policy 1988-91 including these 2 categories of 'capacitors' under separate appendixes and (2) the recognition for 'power capacitors' as distinct entity under some notification issued under Customs Tariff Act. For example, Notification No. 91/89 dated 1-3-1989 in Sr. No. 9 speaks of capacitors excluding paper capacitors, power capacitors, medium and high frequency capacitors and disc ceramic capacitors.
From this, the Collector has held that "power capacitor has been distinguished from other categories of capacitors such as paper capacitor, disc ceramic capacitors and medium and high frequency capacitors, having been separately mentioned. The Collector has also found plastic film capacitors having been accepted as a different category from power capacitor in the Scheme envisaged in the Customs Tariff. He has also noted that this distinction between power capacitor and several other categories of capacitors is also evident from the licencing policy of Ministry of Industry New Delhi and SSI Licencing authority, Maharashtra, which have endorsed the appellant's licence with specific references to different types of capacitors. Taking these materials into consideration, the Collector has concluded that "Power capacitors" have a distinct identity of their own from other types of capacitors, including plastic film capacitors, irrespective of the fact that the dielectie base is the same i.e. P.O. film. The Collector has also observed that the import licence obtained by the appellants would be valid only for manufacture of capacitors including power capacitors and power factor connection film capacitors, but excluding all types of capacitors for use in electronic industry. He has further observed that in accordance with the scheme of Notification No. 345/86, only specified goods for manufacture of specified electronic items have been referred for concessional benefit. He had drawn his reference from reading of ISI specification IS: 1885 (Part 42) -1985 that the imported item is used for correcting and improving power factors in transmission lines, distribution systems etc. and after further noting the difference in functioning of power capacitors and plastic film capacitors from ISI specification, the Collector has observed that Import Policy and Customs Tariff recognise only film capacitors for electronic industry and the imported item not being one, the benefit of Notification No. 345/86 is not available to the appellants. He has finally concluded that as the intended scope of the notification is related to manufacturers of electronic items and benefit of concessional rate is available only for the import of plain plastic films going into the manufacture of plastic films capacitors/mixed dielectric capacitors used in the electronic items (which usually have small capacitance abilities) and not intended for benefit where such films were used in the manufacture of medium and large sized capacitance units such as the power capacitors which do not constitute 'electronic item', the imported item, therefore, can get the benefit of the notification in question.
9. The appellants in this appeal have seriously challenged these findings of the lower authorities and have contended that there is no dispute with regard to the imported goods falling within Item 45 of the table annexed to the Notification No, 345/86 dated 16-6-1985 and also there is no dispute of the item imported for manufacture of capacitors.
The capacitors manufactured out of plastic films can only be regarded as plastic film capacitors and hence the imported item is clearly entitled for the benefit of the said notification.
10. They have further stated that the expression 'plastic film capacitors' appearing in item 45 of the table annexed to the said Notification No. 345/86 dated 16-6-1986 is clearly a description of capacitors based on raw materials used for the manufacture of capacitors. If a capacitor is manufactured out of plastic film, it has to be regarded as 'plastic film capacitor' within the meaning of the said Item No. 65. They have contended that in the present case, there is no dispute with regard to the said goods having been imported for manufacture of capacitors. As the raw material used for manufacture of such capacitors is plastic films, such capacitors must be regarded as plastic film capacitors within the meaning of the said Item 45 in the notification in question and benefit to be extended to them. They have also relied on the common parlance and Trade understanding and also by persons dealing with such goods who regard plastic film capacitors to mean any capacitor manufactured out of plastic film. They have contended that the expression "power capacitor" is a description of capacitors based on end use. The expression 'plastic filament capacitors' is a description of capacitors based on the raw material used for its manufacture. They contended that power capacitors can also be plastic film capacitor. They further contend that there is nothing in the said Import Export Policy or in the said Notification No. 91/89 or in the said licencing policies, on which basis a different conclusion can be drawn. They submit that the Collector has erred in holding that 'power capacitors' have distinct identity from other kind of capacitors including plastic film capacitors. They contend that power capacitors can also be regarded as a plastic filament capacitors if such capacitor is manufactured out of plastic films. They contend that the Collector has not duly appreciated the true meaning, scope and effect of the relevant definitions contained in ISI specification IS: 1885 (Para 42) -1985. They submit that in the said ISI specifications, a film capacitor has been defined as "a capacitor with a dielectric consisting of film of plastics usually impregnated" and therefore, a capacitor manufactured out of plastic films must be regarded as a plastic film capacitor. They further contended that the Collector has erred in holding that the intended scope of the Notification No. 345/86 relates to the manufacture of electric items only and that the benefit of the said notification would be available to categories of electronic items only and that there is nothing in the said Notification No.345/86 to come to such a conclusion.
11. We have heard Shri N.R. Khaitan, learned Advocate for the appellants and Shri R.M. Ramchandani, learned DR for the Revenue.
12. Shri Khaitan reiterating the grounds of appeal, urged that while construing a notifications, materials outside the notification cannot be looked into and the Collector had therefore, committed a serious error in so doing while admitting the use of P.P. film in the use and manufacture of power capacitors. He further contended that power capacitor cannot have different identity with film capacitor and the Collector's reliance on licence and other materials to draw a different conclusion was not based on technical literature nor on the basis of ISI specification on the basis of common parlance and Trade understanding. Therefore, the Collector had proceeded on a general basis and had totally misconstrued the notification. A notification has to be plainly read without giving any supposed intendment and the Collector had read more than what was stated in the notification. The Collector cannot read the notification in the light of licence or Import Policy or Customs Tariff and give a different interpretation to the notification than what could be gathered by simple reading of the notification. He contended that the Collector has mis-applied the notification to mean that the power capacitor mentioned therein referred only to electronic power capacitor.
13. In support of his contention, he relied on the technical literature which was also before the Collector and read out the relevant pages to show that the imported item was used in the power capacitor for which the notification granted the exemption. Shri Khaitan relied on the following citations -Union of India v. Tata Iron & Steel Co. AIR 5. Metrosyl v. Collector of Central Excise Patna 1991 (53) ELT 93 (Tri)- Order No. 1411/89-C dated 14-11-1990.Bharat Surgical Co. v. Collector of Customs 14. Shri R.M. Ramchandani, learned DR reiterated the findings of the lower authorities. He pointed out the appellants refusal to amend the Bond which has been referred in the order of the Assistant Collector in these words "It was suggested of the importer that if they claim that the power capacitor and plastic film capacitors are one and the same thing, they may amend the end use bond so as to mention that the end product is plastic film capacitors instead of power capacitors. They however, refused to do so". Hence, the SDR submitted that the clear inference is that both the types of power capacitors were different and the appellants were not going to manufacture the plastic filmer capacitor for which the licence was granted. Shri Khaitan learned advocate intervened to point out that the appellants had given an undertaking before the Collector to amend the bond and also to produce the end use certificate to that effect. The learned SDR reiterated the findings of the Collector in respect of the licence Import Policy granted for power capacitors while the notification was intended to grant the benefit only to capacitors for use in electronic industry and not to the one manufactured by the appellants. He contended that the burden to proof to claim a benefit under a notification is on the appellants which had not discharged and in this connection, relied on the following rulings - 1. Hemraj Gordhandas v. Asstt. Collector of C.E. 'Customs and Ors.
1978 (2) ELT J350.Mysore Indl. Plastic Corporation v. Collector of Customs, Madras 1983 (12) ELT 845.
15. We have carefully considered the submissions made by both the sides and perused the order of the lower authorities. The simple question that arises for our consideration is as to whether the imported item is entitled to the benefit of the Notification No. 345/86 dated 16-6-1986.
The relevant portion of the said notification is reproduced below - "In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (3) of the Table hereto annexed and falling within the Chapter of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) specified in the corresponding entry in column (2) of the said Table, when imported into India for the purpose of manufacture of the goods specified in the corresponding entry in column (4) of the said Table, from (a) so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of the amount calculated at the rate of thirty per cent ad valorem, and (b) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely - (i) an officer not below the rank of a Joint Director in the Department of Electronics of the Govt. of India or a Joint Director in the Directorate of Industries of the Govt. of a State or an Addl.
Industrial Advisor in the Directorate General of Technical Development of the Government of India, as the case may be, is satisfied that the goods in question are required for the purpose specified above and recommends grant of the above exemption provided that this condition shall not apply in the case of goods imported against supplementary import licences; (ii) the importer shall by the execution of a bond in such form and for such sum as may be specified by the Assistant Collector of Customs, bind himself to pay on demand in respect of such goods, as are not proved in the satisfaction of the Assistant Collector of Customs to have been used for the aforesaid purpose an amount equal to the difference between the duty leviable on such goods but for the exemption contained herein and that already paid at the time of importation.--------------------------------------------------------------------------------Sl. No. Chapter of the Description of goods For the manufacture of First Sch. to goods--------------------------------------------------------------------------------(1) (2) (3) (4)--------------------------------------------------------------------------------45 39 (i) Plain plastic films Plastic Film Capacitors, (other than polystyrene Mixed Dielectric We have noted in extenso the reasoning given by the lower authorities in rejecting the benefit of the notification to the imported goods. The appellants contentions are also noted. We are inclined to accept the appellants contentions for the following reasons.
16. There is no dispute with regard to the imported item being used for the manufacture of power capacitors or plastic film capacitors. It is also not in dispute that the industrial-1 licence granted by the Govt.
of India to the appellants, has been amended on 20th April, 1987 as follows -Item of Manufacture Annual capacity(i) Capacitors of all types 2.2 (Two point two million Nos.).(ii) Capacitors of all types 25,000 (Twenty-five thousand) KVAR The appellants have given an undertaking to produce an end use certificate to this effect and also to amend the Bond to the satisfaction of the Asstt. Collector. The appellants have contended that in trade parlance and common usage, it is understood that 'plastic film capacitors' means any capacitor manufactured out of plastic films.
They have relied upon the technical literature as well as ISI Specification IS: 1885 (Part 42) 1985 as well as ISI specification for shunt capacitors for power system IS-2834-1986. These materials are sufficient to come to conclusion that the imported item is used for the manufacture of the plastic film capacitors for which the notification in question is intended. But, however, the learned Collector has read into the notification more than what is required to be plainly gathered. The Collector has proceeded on the basis of sup-posed intendment of the notification to grant exemption only to such plastic film capacitors which are used in the electronic industry. Such a reading has been based on the Customs Tariff and on reference in Appendix 6, Part I as AM 88-91. This is not a dispute pertaining to wrong importation or any of the charges made under Section 111 or 112 of the Customs Act. The Collector would have been justified to have come to such a conclusion, had there been such charges made out for confiscation, penalty and seizure. The Department has not made out any dispute in the violation of Customs Act, or charged the appellants for any of the contravention of licence or Import Policy. Therefore, the authorities were to plainly apply the notification in question. So long as the imported item goes into the manufacture of the end product namely plastic film capacitor, the benefit has to be extended by execution of end use bond certificate. The Department would be justified to enforce the bond if there is any breach of the notification or the Bond or on failure to produce the end use certificate. The learned Collector had concluded that the notification intended to give benefit only to such plastic film capacitors which were to be used in electronic industry. There is no such criteria laid down in the notification. If it were so, then the Govt. would have incorporated it in the notification. More should not be read in the notification by applying materials which are not part of notification as they would become extraneous and make the notification otiose and nugatory. The Supreme Court has clearly laid down the law as stated in the cases of Hemraj Gordhandas, Aluminium Corporation, TISCO (supra) referred to by the appellants, which is now well settled propositions.
Therefore, the findings of the lower authorities are not sustainable and they require to be set aside. The appellants are required to amend the Bond given to the Asstt. Collector and produce the end use certificate and follow such other conditions as are stipulated in the notification in question.