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Photovisual Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(17)ELT443TriDel
AppellantPhotovisual
RespondentCollector of Customs
Excerpt:
.....would not advance the case of the appellants in this proceeding. the question whether a particular imported machinery would attract duty or not has to be decided by the customs authorities. as the appellants' establishment is not carrying on any manufacturing activity, it was rightly held that the appellants would not be entitled to concessional rate of duty. the sdr has also particularly pointed out that photographic equipment was not one of the items recognised even by the machinery committee for determining the definition of machinery and component parts of machinery. developing process cannot be considered as in industrial activity. the equipment imported may be useful for the purpose of expansion of the appellants' laboratory. on that ground, the establishment cannot be construed as.....
Judgment:
1. The appeal is against the order of the Collector (Appeals), Calcutta in No. Cal-Cus-3029/82, dated 16-10-82 confirming the order of the Assistant Collector of Customs, No. S. 37C.(P) Proj-74/81A, dated 16-11-81.

2. The appellants are a photographic establishment and laboratory is situated at 27-A, Circus Avenue, Calcutta. They carry on business inter alia of colour film processing and printing of colour films. Their business has been registered as a small scale industrial unit with the Directorate of Industries, Government of West Bengal. The appellants were granted two import licences for the import of (i) one number Divomat Mini Film Developing Machine, including Automatic Replenishment Drying Cabinet and five hangers, compressor for air 1000 MM tank height and spore part kit; (ii) one number Propak Paper Processor Model 50/1 with accessories and user spare part kit. The goods were cleared under Heading 84.66 of the First Schedule to the Customs Tariff Act, 1975.

According to the appellants, the machinery, instrument, apparatus, appliances or auxiliary equipment are required for initial setting up of a unit or substantial expansion of an existing unit. In support of their contentions they relied on the following circumstances : (i) That Sponsoring Committee, i.e., Local C.G. Committee, examined all the relevant facts, and after being fully satisfied that the import of the said machineries was covered by the provision of Heading No. 84.56 of the Tariff Act, recommended to the Joint Chief Controller of Imports & Exports for making necessary endorsement on the import licence, as stipulated under para. 174(1) of the Hand Book of Import Export Procedure 1980-81.

(ii) Para 174(1) (ibid) provides inter alia for capital goods required for the initial setting up or substantial expansion of a project endorsed or recommended by the Sponsoring Authority; (iii) The Small Industries Service Institute, Ministry of Industry, Government of India, in their letter dated 2-3-81, have duly certified that the machineries covered by the said licences were required by the appellants for substantial expansion of its colour laboratory.

2. The appellants cleared the goods during February, 1981. Five months thereafter (on 25-7-81) a show cause notice was issued that the machineries imported did not manufacture/produce any standard products for marketing or otherwise and that the activities of processing and printing of the colour negatives cannot be considered as manufacturing activity. It was also alleged that the plant in question was a non-industrial unit and did not come under the purview of the Heading 84.66. Since the goods were covered under Heading 90.10 of the First Schedule, there was a demand of a short levy of customs duty amounting to Rs. 2,51,239.77. The appellants submitted a reply on 11-8-81. The Assistant Collector, by his order dated 3-12-81, rejected the request of the appellants for registration of the relevant contracts on the identical grounds aforesaid. In the meanwhile, the Deputy Director of Industries (Certification), Government of West Bengal, wrote to the Customs authorities to accord the benefit of concessional rate of import duty. A similar letter was sent by the Small Industries Service Institute. The Collector of Customs, vide his order dated 13-2-82, rejected the contentions of the appellants. The appellants moved the High Court, Calcutta, under Article 226 of the Constitution challenging the validity of the show cause notice. But ultimatily the appellants were granted liberty to file separate application or such other steps advised. The Collector of Customs dismissed the appeal of the appellants on 16-10-82.

3. Shri Chandrasekharan, the learned counsel for the appellants, urged that the appellants were carrying on manufacturing activity with machinery which constitutes industrial plant and the imports are required for the substantial expansion of their activities. He pointed out that several Government authorities have upheld that the unit is an industrial unit and the Customs authorities had no right or authority to ignore the same. He also emphasised that colour film processing and printing is considered as an industry as per the guidelines issued by the Government of India. He filed the balance sheet from 1973-74 to 1981-82. During 1981-82, the turnover was Rs. 33,03,817.86 and in 1982-83, it was Rs. 47,55,070.65. He filed a statement of installation of machinery from 1973-74 to 1981-82. A statement showing the number of various employed by the appellants from 1974 to 1982 was also filed to show that the appellants were expanding their activities. The rental receipt was filed to indicate that additional premises were taken on rent for the same purpose.

4. Shri K.V. Kunhikrishnan, the Departmental Representative, pointed out that the entry contemplated industrial unit. According to him, the appellants were not manufacturing any standard product. Their unit was only a laboratory. There was no manufacturing activity. He pointed out that as per paragraph 177(2) of the Hand Book of Import & Export Procedure 1983-84, the appropriate authority to decide the benefit of the concession was the Customs authorities. He argued that as per the report of the Machinery Committee 1922 photographic equipment was not one of the items identified. He pointed out that the Tariff Entry prior to 1975 read as follows : (c) apparatus and appliances, not to be operated by manual or animal labour, which are designed for us in an industrial system as parts indispensable for its operation and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose.

Note : The term "Industrial" system used in sub-item (c) means an installation designed to be implied directly in the performance of any process or series of processes necessary for the manufacture, production or extraction of any commodity." 5. After careful discussion of the materials placed, we are of the view that the contentions of the appellants cannot be accepted. Tariff Item 84.66 specifically refers to "all items of auxiliary equipment as well as components required for the initial setting up of a unit or the substantial expansion of an existing unit of a specified industrial plant" (the other words are omitted as they are unnecessary). Shri Chandrasekharan stated that the machinery in question has been imported for the purpose of substantial expansion of the appellants' industry.

We have initially to find out whether the appellants' establishment can be treated as an industry. Only if that basis is established, then the import of the machinery would qualify for assessment under heading 84.66. The term 'industrial plant' has not been defined in the Customs Act or elucidated in the notifications. But an industry has been defined in Shri T.P. Mukerjee, Law Lexicon Volume I, Page 832, as "any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft of industrial occupation or avocation or workmen. But this definition refers to the connotation of that term under the Industrial Disputes Act. "Industry" has been defined in Chambers 20th Century Dictionary, page 669, as "any branch of trade or manufacture". So manufacturing activity is an important indice to determine whether any particular establishment would be an industry. If there is no manufacturing activity or production, then it would not be an industry within the meaning of that term. "Plant" includes collection of machines and appliances grouped together in any workshop, factory or building. Taking these two words together, it is manifest that an "industrial plant" envisages the production of goods "machinery or plants" being used in that production. In this background, if we examine the activity carried out by the appellants, it would be clear that they are not carrying on an industry. They have a photographic laboratory and the appliances are required for the purpose of improving their laboratory activity. It is not an industrial plant contemplated under Tariff Item 84.66. That apart, this tariff entry contemplates the expansion of the existing unit which itself must be an industrial plant. But, on a careful analysis, we are of the view that the appellants' activity cannot be equivated to that of an industrial unit. As rightly observed by the lower authority, the appellants' establishment is not engaged in the manufacture of any standard product. They are not maketing such product either. The mere fact that they supply numerous copies of the colour pictures will not make their establishment art industry. The establishment has no doubt been registered as a small scale industrial unit. The Government of West Bengal have also recognised the institution as such. But the registration was for the purpose of extending certain benefits which a small scale industrial unit would be entitled to. On that ground, it cannot be presumed that the appellants' establishment would be an industry. The letter granted by the Ministry of Industries recommending a concessional Customs duty would be in furtherance of the recognition of the establishment of the appellants' unit as a small scale Industrial Unit. These documents would not advance the case of the appellants in this proceeding. The question whether a particular imported machinery would attract duty or not has to be decided by the Customs authorities. As the appellants' establishment is not carrying on any manufacturing activity, it was rightly held that the appellants would not be entitled to concessional rate of duty. The SDR has also particularly pointed out that photographic equipment was not one of the items recognised even by the Machinery Committee for determining the definition of machinery and component parts of machinery. Developing process cannot be considered as in industrial activity. The equipment imported may be useful for the purpose of expansion of the appellants' laboratory. On that ground, the establishment cannot be construed as an industrial unit. The learned counsel for the appellants cited the ruling reported in 36-STC-104, and urged that processing is a form of manufacture. But that decision has no relevance since it refers to a definition in that particular statute. We do not argee that the recommendations of the Export and Import Control Authorities would be the basis to conclude if an institution would be an industry. This recommendation has been issued presumably on the basis that the appellants' establishment is a small scale industrial unit. The additional evidence produced by the appellants will not advance their case either. These appliances have been imported by the appellants only for expanding their activities of a photographic laboratory. We are of the view that the appellants cannot claim the benefit of Tariff Item 84.66. Incidentally we may point out that entry 84.66 envisages the Government approving certain projects as coming within the purview of the entry. The laboratory of the appellants has not been approved as a project of the Government.

There are no grounds to interfere with the orders of the authorities below. The appeal is hence dismissed.


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