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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5282 OF 2004

M/S. IVRCL INFRASTRUCTURE &  PROJECTS LTD.           …APPELLANT   

VERSUS

COMMISSIONER OF CUSTOMS, CHENNAI         ...RESPONDENT

J U D G M E N T  

R.F. Nariman, J.

1. The facts necessary to decide this  appeal are as  

follows.   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  

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India for  construction of  roads as a part  of  the Golden  

Quadrilateral, Phase-2 Project in Andhra Pradesh.  

2. 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.  We  

are concerned with serial No.217 of this notification which  

reads as follows:

“217. 84 or any other Goods specified in List 11 Nil   Nil 38

Chapter required for construction  of roads.”

The conditions 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  

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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.”

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List  11  with  which  we  are  concerned  contains  several  

entries.   We are concerned with Entry No.1 which 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  for  a  total  value  of  906,574  DM.  Lintec  and  the  

appellant  decided  to  split  the  purchase  order  between  

Lintec, Germany and M/s Marshalls, Chennai.  Lintec was  

now to receive a total value of 585,700 DM and Marshalls  

was  to  receive the  balance.   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. Vide a Bill of Entry dated 28.12.2001, the import  

of  equipment  from  M/s  Lintec  was  made  by  the  

appellants, who claimed that the said items fell within the  

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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.   Various  representations  

were then made to the Chief Commissioner of Customs to  

allow the goods into India without  payment  of  customs  

duty.   On  22.2.2002  the  goods  were  assessed  

provisionally and then allowed to be cleared.  By an order  

of the same date, the Commissioner of Customs held that  

the exemption notification did not apply for two reasons.  

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.   The  

Commissioner, therefore, held:-

“14.2 Coming to the issue whether the goods  imported are the complete plant or not, I find  that  M/s.  IVRCL,  placed  an  order  for  the  

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supply of the whole plant on M/s. Marshall –  Lintec, Chennai, (a Joint Venture collaboration  between  M/s.  Marshall  &  M/s.  Lintec,  Germany).  M/s. Marshall – Lintec, Chennai,  entered into an agreement with M/s. IVRCL,  for the supply, erection and commissioning of  the plant.  Therefore, the order placed on M/s.  Marshall  –  Lintec,  Chennai,  was  terminated  since  the  Joint  Venture  Company  was  not  finally  formed  and  separate  orders  were  placed  on  M/s.  Lintec,  Germany,  and  M/s.  Marshall.  M/s. Lintec, Germany was to supply  certain components and one part of the plant  in  a  fully  assembled  container  and  M/s.  Marshall were to manufacture the indigenous  components  and  assemble  the  imported  components and the indigenous components  in the indigenously manufactured containers.  Further, the scope of supply included testing,  erection  and  commissioning  of  the  plant  by  M/s. Marshall.  The cost of the plant is divided  in the ratio approximately 60:40 between the  partners  M/s.  Lintec,  Germany  and  M/s.  Marshall.  

14.3 Further the agreement includes the cost  of transportation of the imported components  to the factory of M/s. Marshall.  As per their  Technical  Transfer  Contract,  M/s.  Lintec  supplied  the  drum  assembly  and  the  components for the manufacture of the plant  by M/s. Marshall.  No separate agreement had  been  entered  either  by  the  principal  or  the  local  representatives  with  the  importer  M/s.  IVRCL.  I find that the principal and the local  representative  of  the  supplier  as  per  their  discussion  and  communications  with  the  importer,  had  arranged  to  raise  the  import  documents  by  describing  the  goods  as  a  complete plant though the goods supplied are  

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only  the  drum  assembly  and  components.  The  examination  of  the  imported  goods  confirmed  that  out  of  11  segments  of  the  whole  plant  to  be  supplied  in  a  fully  assembled  condition  to  the  importers,  only  one assembled segment viz. drum container  covering the screening and drying drum had  been supplied apart from the components in  another commercial container.  

14.4 I also find that Shri S. Ramachandran,  Sr.  Vice President  of  the importing firm has  clearly  admitted,  in  his  voluntary  statement  dated  03.01.2002  that  the  goods  imported  were  not  a  complete  plant  and  once  assembled  with  the  indigenous  components  would  form  a  complete  plant.   Though  he  claimed that he had given the statement dated  03.01.2002 under  duress,  in  his  subsequent  statement  given  on  21.02.2002,  he  again  admitted  that  imported  goods  were  only  components  and  they  have  not  attained  essential characteristics of a plant.  

14.5 Further I find that Shri M.V. Narasimha  Rao, Project Director of NHAI, with reference  to  the exemption certificate  issued by them,  after  careful  scrutiny  of  the  related  import  documents  and  also  the  examination  proceedings  dated  24.01.2002,  has  clarified  that  the  goods  under  import  were  not  the  complete  plant  and  that  the  imported  components  did  not  have  the  essential  characteristics of the plant.  

14.6 Under Notification No.17/2001, that the  benefit of duty exemption is available only for  the import of the plant in full either in CKD or  SKD  condition.   The  subject  import  can  be  considered  only  as  a  part  of  the  plant.  

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Therefore,  the  goods  under  import  are  not  eligible  for  the  duty  exemption  as  provided  under the Notification No.17/2001.”  

3. An appeal was carried by the appellant to CESTAT  

which  set  aside  the  Commissioner’s  reasoning  on  

condition 38 of the notification. It held that there was in  

fact  no  Joint  Venture  Company  formed  and  the  Joint  

Venture between the appellant and M/s Shapoorji Pallonji  

& Company Limited was in the nature of a partnership, in  

which  case  any  of  the  partners  could  import  goods  

covered  by  the  exemption  notification.   However,  it  

agreed with the Commissioner that what had in fact been  

imported was not a complete plant and, therefore, it would  

follow  that  the  exemption  notification  would  not  be  

available on this score. CESTAT held:-

“10. The  next  issue  is  whether  the  goods  imported and cleared under the Bill  of Entry  filed by IVRCL were eligible for the benefit of  exemption in terms of Sr. No.217 of the Table  (read with Item No.(1) in List-11) annexed to  the  Notification.   It  is  settled  law  that  an  exempting  provision  under  a  taxing  statute  requires to be construed strictly vide Novopan  India (supra) wherein the apex Court held that  

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a person invoking an exempting provision to  relieve  him  of  tax  liability  must  establish  clearly that he is covered by the said provision  and  that,  only  in  the  case  of  doubt  or  ambiguity,  the  benefit  thereof  must  go  the  State.   If  the  goods  in  question  satisfy  the  description given at Item No.(1) in List-11, it  will  be  eligible  for  the  exemption.   The  description reads : “Hot mix plant batch type  with  electronic  controls  and  bag  type  filter   arrangement 160 tons per hour capacity.” The  Revenue has argued that a complete hot mix  plant  was  not  imported  and  that  only  some  components  thereof  were  imported.   The  appellants have contended that, barring some  steel structures, all the essential components  of  hot  mix  plant  were  imported  in  terms  of  purchase  order  placed  on  the  German  supplier.  We have come across two purchase  orders in the file, marked as Annexures-4 and  6  of  the  memorandum  of  appeal,  both  identically  numbered  and  identically  dated  (No.11  dated  21.7.2001).   The  Annexure- 4/purchase  order  shows  an  amount  of  DM  906,574  while  Annexure-6/purchase  order  shows an amount of DM 550,000 as the total  price of  what is described as “hot  mix plant  (batch  type)  CSD  2500,  CAP  160  tons  per  hour as per specifications enclosed”.  It  has  been  claimed  by  the  appellants  that  the  amount shown in Annexure-6/purchase order  is  the  final  price  as  settled  through  negotiations with the German Supplier.   We  have  already  noted  that  both  the  purchase  orders  are  identically  numbered  and  identically  dated.   Any  negotiation  between  IVRCL and the Germany supplier should have  taken place on 21.7.2001 itself.  No evidence  of any such negotiation is available on record.  We  have  also  come  across  the  work  order  

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issued by IVRCL to M/s Marshall Sons & Co.  (Mfg.)  Ltd.,  Chennai.   This work order gives  the following description of work: “assembling  of equipment supplied by Lintec vide P.O. No.  SRP/CAP/11/2K1-02  dated  21.7.2001  and  also supply and erection of own structures as  mentioned  in  Annexure”.   The  total  cost  of  work shown in the work order is DM 356,574.  We note that the amount shown in Annexure- 4/purchase order is the arithmetical sum of the  amounts shown in Annexure-6/purchase order  and Annexure-7/work order and, further, that  the  description  of  work  allotted  to  Marshall  includes  supply  and  erection  of  structures,  apart  from  assembling  of  the  equipments  supplied by Lintec.  It is clear from these facts  that  some of  the components viz.  structures  for  the  hot  mix  plant  were  supplied  by  Marshall,  that  the  amount  paid  to  them  towards cost of such components and cost of  assembling of Hot Mix Plant was DM 356,574,  that the amount paid by IVRCL to Lintec for  the components supplied by the latter was DM  550,000 and that the total cost of the hot mix  plant  as erected at  the project  site  was DM  906,574.   Lintec’s  letter  to  IVRCL  vide  Annexure-5  itself  had  called  upon  the  appellants to place the necessary order with  Marshall for their share of the deal of setting  up  hot  mix  plant.   Only  9  containers  were  listed in the first annexure to that letter, which  represented the “Lintec scope of supply”.  The  second  annexure  to  the  letter,  representing  the “Marshall  scope of supply”,  mentioned 2  containerised  items  besides  structural  parts.  The  documentary  evidence  is  squarely  in  support  of  the  Commissioner’s  finding  that  only some components of hot mix plant were  imported  from  Germany  by  the  appellant- company.  

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11. Coming  to  the  oral  evidence  under  Section 108 of the Customs Act, we note that  it  was stated by Sh.  P.S.  Banik of  Marshall  that they were the Indian agents of Lintec for  sale of hot mix plants in India and that, as per  orders  received  from  IVRCL,  they  had  provided  bitumen  tanks  and  storage  silo  (containers with internal fabrication) and other  structural fabrications for the hot mix plant in  question.   He  also  stated  that  the  plant  consisted  of  11  containerised  sections,  of  which a few were provided by Marshall.  Sh. J.  Bhattacharjee  of  Marshall  stated  that  the  components manufactured indigenously were  essential for the function of the plant.  Sh. S.  Ramachandran  of  IVRCL  himself  admitted  that  the  plant  was  not  complete  without  addition of the indigenous items.  Shri M.V.N.  Rao  of  NHAI  stated,  after  examining  the  import documents, that the complete plant had  not arrived and that the imported components  did  not  have  the  essential  characteristics  of  hot mix plant.  All these statements – none of  them retracted or controverted – coupled with  the  documentary  evidence  would  prove  beyond  doubt  that  the  goods  imported  by  IVRCL  did  not  represent  anything  with  essential  character  of  a  hot  mix  plant,  let  alone  a  complete  plant,  to  satisfy  the  description at Item No. (1) of List-11 under the  Notification.   Therefore,  we  are  unable  to  accept  the  counsel’s  argument  that  the  imported goods should be treated as ‘hot mix  plant  unassembled.’   What  was  exempted  from import duty in terms of Sr. No.217 read  with  Item  No.(1)  of  list  11  under  the  Notification was a complete hot mix plant fully  described  at  the  said  Item  No.  (1)  and  not  some components thereof.  There can be no  

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doubt  or  ambiguity  with  regard  to  the  description of goods at the said Item No. (1).”   

4. Shri  Lakshmikumaran,  learned  counsel  who  

appeared on behalf of the appellant has argued that 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.   His  further  argument  was that  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.  Ms. Pinky Anand, learned Additional Solicitor  

General  countered  these  submissions  and  argued  that  

there  are  concurrent  findings  of  fact  by  both  the  

Commissioner  and  the  CESTAT  that  what  was  in  fact  

imported was not the complete plant and since that was  

so, the benefit of the exemption notification would not be  

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available.  She further pointed out that there were various  

admissions made by the appellant as well as by persons  

who deposed on their  behalf  which would show that  in  

any case even the essential portions of the plant had not  

been imported.  

We have heard learned counsel for the parties.  We  

find that the first argument made by Shri Lakshmikumaran  

can  be  disposed  of  immediately.   The  subject  matter  

before  us  is  an  exemption  notification  issued  under  

Section 25 of the Customs Act, 1962.  The interpretative  

notes that have been referred to by Shri Lakshmikumaran  

are in the Customs Tariff Act.  Note 2(a) referred to by  

Shri Lakshmikumaran reads as follows:

“2. (a) Any reference in a heading to an  article shall be taken to include a reference to  that article incomplete or unfinished, provided  that,  as  presented,  the  incomplete  or  unfinished article has the essential character  of the complete or finished article.  It shall also  be taken to include a reference to that article  complete or finished (or falling to be classified  as complete or finished by virtue of this rule),  presented unassembled or dis-assembled.”

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It  is clear that such note will  have no application to an  

exemption notification which is issued under Section 25 of  

the  Customs  Act.   Therefore,  the  fact  that  an  

unassembled plant which is incomplete but which has the  

essential character of a 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. Two such decisions will suffice.  In  

Commissioner  of  Customs  (Imports),  Mumbai  v.  

Tullow India Operations Ltd., (2005) 13 SCC 789, this  

Court held:

“34. 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 wherefor 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.”

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Similarly  in  G.P.  Ceramics  Private  Limited  v.  

Commissioner,  Trade  Tax,  Uttar  Pradesh, (2009)  2  

SCC 90, this Court held:-

“29. 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.  [See CTT v. DSM Group of Industries [(2005)  1 SCC 657] (SCC para 26); TISCO v. State of   Jharkhand [(2005) 4 SCC 272] (SCC paras 42  to  45);  State  Level  Committee  v.   Morgardshammar  India  Ltd. [(1996)  1  SCC  108]; Novopan  India  Ltd. v.CCE  &  Customs [1994  Supp  (3)  SCC  606]  ; A.P.  Steel  Re-Rolling  Mill  Ltd. v. State  of   Kerala [(2007)  2  SCC  725]  and Reiz  Electrocontrols (P) Ltd. v. CCE [(2006) 6 SCC  213].]”

Judged by this test, it is clear that a hot mix plant of the  

type mentioned alone is exempt from payment of customs  

duty.  Obviously, what is meant is that such plant in its  

entirety must be imported albeit in an unassembled form.  

Judged by this test, it is clear that the concurrent findings  

of fact of the Commissioner and the CESTAT requires no  

interference by this  Court  inasmuch as both authorities  

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have held that a complete plant in an unassembled form  

has not in fact been imported.  Further, both authorities  

have relied upon statements made by none other than the  

Vice  President  of  the  Appellant  who  after  retracting  a  

statement  made  on  3.1.2002  has  made  a  subsequent  

statement on 21.2.2002 admitting that the imported goods  

were only components and had not attained the essential  

characteristics of a plant.  The subsequent statement has  

not been retracted.  Further, Shri P.S. Banik an employee  

of Marshalls also made a statement that the plant in its  

entirety consisted of 11 containerised sections of which a  

few  were  indigenously  produced  by  Marshalls.   Shri  

Bhattacharjee also an employee of Marshalls added that  

what  was  manufactured  indigenously  was  essential  for  

the functioning of the plant.  Further, Shri M.V.N. Rao, of  

the  National  Highways  Authority  of  India  stated  that  a  

complete  plant  had  not  been  imported  and  that  the  

components of such plant which were imported did not  

have the essential characteristics of a hot mix plant.  

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5. It is settled law that statements made to an Officer  

of Customs are admissible in evidence under Section 108  

of the Customs Act, 1962.  This Court has held in Gulam  

Hussain Shaikh Chougule v.  S. Reynolds, Supdt.  of  

Customs,  Marmgoa, (2002)  1  SCC 155,  after  quoting  

from several other judgments, that such statements are  

admissible  in  evidence.   The  Court  has  merely  to  

scrutinize whether the admissions made were voluntarily  

or  otherwise.   In  the  present  case,  it  is  clear  that  

unretracted statements made by none other than the Vice  

President  of  the  appellant  company,  representatives  of  

Marshalls,  and  a  representative  of  National  Highways  

Authority of India, having never been retracted later, were  

made  voluntarily.   Reliance  on  the  said  statements,  

therefore, by the authorities below cannot be said to be  

unwarranted in law.   

Shri  Lakshmikumaran in a written submission has  

accepted  that  statements  given  under  Section  108  are  

admissible as evidence.  However, he has cited a number  

of authorities to the effect that when such statements are  

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in  direct  conflict  with  documentary  evidence,  the  latter  

should be given greater weight.  

Thus,  he  relied  upon  a  letter  dated  18.1.2002  

written by the Vice President of the appellant to the Chief  

Commissioner  of  Customs,  Chennai  and  another  letter  

dated 20.1.2002 by National Highways Authority of India  

to  the  Chief  Commissioner  of  Customs,  Chennai.  A  

perusal of these letters would also show that what had to  

be  manufactured  in  India  would  alone  ultimately  go  to  

make up a complete plant.  This is clear from a statement  

made in the letter dated 18.1.2002 to the following effect:

“The  above  mentioned  items  shall  be  assembled in the indigenously procured steel  structural container to make up the complete  mixture container.”

However,  Shri  Lakshmikumaran  relied  upon  the  

following statements in the said letter:

“We  wish  to  mention  at  this  stage  that  the  steel structures which include containers, tank  and  storage  silo  are  low  technology  fabrications  and  do  not  form  essential  components/ parts to the main Hot Mix Plant  systems  and  import  of  such  items  from  

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Foreign Country shall  unnecessarily result  in  outflow of  valuable foreign exchange for  the  country.  

We  wish  to  reiterate  that  we  have  not  compromised  with  regard  to  importing  the  major  essential  characteristics  of  the  plant  thereby keeping the character of the hot mix  plant unchanged.”

This,  however,  has  to  be  read  with  the  following  

statement made in the same letter.  

“We however strongly feel that our company  has genuinely imported the basic character of  the hot mix plant as explained in detail to the  concerned officer of the SIIB and are eligible  for availing duty exemption as per Notification  No.17 of March, 2001 as originally filed in our  Bill of Entry.”

It is clear that on a holistic reading of the said letter  

what has been imported is “the basic character” of the hot  

mix plant and not a complete plant as it is clear that what  

is  manufactured  indigenously  would  alone  ultimately  

complete the plant.  

Equally the letter dated 20.1.2002 being a letter by  

the National Highways Authority of India does not take us  

much further.   In fact,  as has been pointed out  above,  

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Shri M.V.N. Rao of the said authority candidly admitted  

that a complete plant had not been imported and that the  

imported  components  did  not  have  the  essential  

characteristics of  the hot  mix plant  in  question.   In  the  

present  case,  both  the  oral  evidence  and  the  

documentary  evidence  ultimately  lead  to  the  same  

conclusion: namely, that what was imported was not a hot  

mix plant that was complete in itself.   

6. It  may  be  pointed  out  that  CESTAT  has  already  

given the appellant considerable relief.  The redemption  

fine of Rs.5,00,000/- imposed by the Commissioner was  

reduced  to  a  fine  of  Rs.1,00,000/-  and  a  penalty  of  

Rs.1,00,000/- imposed by the appellant has also been set  

aside.  In the circumstances, the appeal is dismissed with  

costs of Rs.1,00,000/-.  

…..………………J. (A.K. Sikri)

…..………………J. (R.F. Nariman)

New Delhi; April 15, 2015.  

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